Is the late fee charged by Baya Bar considered a penalty?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
nchisor reserves the right to modify the method and frequency of collection of the Royalty Fee and Brand Fund Contribution upon forty-five (45) days' prior notice to Franchisee.
- 6.2 Late Fee. If the Royalty Fee, Brand Fund Contribution, or any Gross Revenue Reports are not received by Franchisor as required by this Agreement, Franchisee shall pay to Franchisor, in addition to the overdue amount, a late fee of Fifty Dollars ($50.00). This late fee is reasonably related to Franchisor's costs resulting from the delay in payment and/or receipt of any report, is not a penalty, and is in addition to any other remedy available to Franchisor under this Agreement for Franchisee's failure to pay the Royalty Fee, the Brand Fund Contribution, and/or submit Gross Revenue Reports in accordance with the terms of this Agreement.
- 6.3 Interest. Any and all amounts that shall become due and owi
Source: Item 22 — CONTRACTS (FDD page 56)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, the late fee is not considered a penalty. If a Baya Bar franchisee does not submit their Royalty Fee, Brand Fund Contribution, or Gross Revenue Reports on time, they will be charged a $50 late fee in addition to the overdue amount. Baya Bar states that this late fee is reasonably related to the costs they incur from the delay in payment or receipt of the report.
This means that Baya Bar aims to cover its administrative and operational costs caused by late submissions rather than imposing a punitive measure. This is a fairly standard practice in franchising, where late fees are designed to compensate the franchisor for the extra work involved in chasing up overdue payments and reports.
In addition to the late fee, any amounts due to Baya Bar from the franchisee will also bear interest from the date they are due until they are paid. The interest rate is 18% per annum, or the highest rate permitted by law, whichever is lower. Therefore, it is important for a franchisee to prioritize timely payments and submissions to avoid these additional costs.