Is the interest rate charged by Better Blend on late payments capped by law?
Better_Blend Franchise · 2024 FDDAnswer from 2024 FDD Document
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Franchisee reports Adjusted Gross Sales. Franchisee acknowledges that BBF has the right to remotely access Franchisee's point-of-sale system to calculate Adjusted Gross Sales.
- (c) Late Fees and Interest. If Franchisee does not make a payment on time, Franchisee shall pay a $100 "late fee" plus interest on the unpaid amount at a rate equal to 18% per year (or, if such payment exceeds the maximum allowed by law, then interest at the highest rate allowed by law).
- (d) Insufficient Funds. BBF may charge $30 for any payment returned for insufficient funds (or, if such amount exceeds the maximum allowed by law, then the fee allowed by law).
- (e) Costs of Collection and Enforcement. Franchisee shall repay any costs incurred by BBF in attempting to collect payments owed by Franchisee or to enforce any other provision of this Agreement (including without limitation, reasonable attorne
Source: Item 22 — CONTRACTS (FDD page 43)
What This Means (2024 FDD)
According to Better Blend's 2024 Franchise Disclosure Document, the interest rate charged on late payments is subject to legal limitations. Specifically, if a franchisee fails to make a payment on time, Better Blend will charge a $100 late fee. Additionally, interest will accrue on the unpaid amount at a rate of 18% per year. However, the agreement specifies that if this 18% interest rate exceeds the maximum rate allowed by law, the interest rate will be adjusted to the highest rate legally permissible.
This provision ensures that Better Blend remains compliant with applicable laws regarding interest rate caps, which can vary by jurisdiction. For a prospective franchisee, this means that the actual interest rate charged on late payments may be lower than 18% depending on the laws of their specific state or locality. It is important to note that Better Blend also charges a $30 fee for any payment returned due to insufficient funds, which is also capped at the maximum amount allowed by law.
Better Blend also has the right to recover any costs incurred while attempting to collect late payments or enforce any other provision of the franchise agreement, including reasonable attorney fees. Furthermore, any payments received from the franchisee can be applied to any obligation in any order that Better Blend determines, regardless of any designation by the franchisee. This gives Better Blend considerable latitude in how they handle and apply payments, which could impact franchisees who have multiple outstanding obligations.
In summary, while Better Blend specifies an 18% annual interest rate on late payments, this rate is capped by law, providing some protection to the franchisee. Franchisees should be aware of the potential for late fees, interest charges, and other costs associated with non-compliance, and they should understand how Better Blend applies payments to outstanding obligations.