What is the prepayment premium for the Beverly Anns Cookie loan in year one?
Beverly_Anns_Cookie Franchise · 2025 FDDAnswer from 2025 FDD Document
You will be permitted to prepay your Loan if they simultaneously pay a premium as follows: for each year or partial year remaining: (A) 3% in year one of the Loan, (B) 2% in year two of Loan, and (C) 1% in year three of the Loan; provided, that there will be no premium thereafter.
Source: Item 22 — CONTRACTS (FDD page 57)
What This Means (2025 FDD)
According to the 2025 Beverly Anns Cookie Franchise Disclosure Document, franchisees are permitted to prepay their loan, but will simultaneously be charged a premium. In the first year of the loan, the prepayment premium is 3% for each year or partial year remaining.
For example, if a franchisee takes out a loan and decides to pay it off within the first year, they will have to pay a 3% premium on top of the remaining balance. This premium decreases to 2% in year two and 1% in year three. After the third year, there is no prepayment premium.
This type of prepayment penalty is fairly common in franchise lending. It is designed to protect the lender from losing out on interest income if the borrower pays off the loan early. Franchisees should factor this potential cost into their financial planning when considering taking out a loan to finance their Beverly Anns Cookie business.