factual

What is the maximum permissible interest rate that can be charged to a Brain Balance franchisee in California?

Brain_Balance Franchise · 2025 FDD

Answer from 2025 FDD Document

EXHIBIT 7 CALIFORNIA ADDENDUM

This Addendum to the Franchise Agreement is agreed to by and among BB FRANCHISING LLC and the Franchisee identified below.

    1. THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE DISCLOSURE DOCUMENT.
    1. Neither BB FRANCHISING nor any person or franchise broker listed in Item 2 of the Franchise Disclosure Document is subject to any currently effective order of any National Securities Association or National Securities Exchange, as defined in the Securities Exchange Act of 1934, (15 U.S.C.A. 78a et. seq.), suspending or expelling such persons from membership in such association or exchange.
    1. California Business and Professions Code Sections 20000 through 20043 provide rights to the Franchisee concerning termination or non-renewal of a franchise. If the Franchise Agreement or Disclosure Document contains a provision that is inconsistent with the law, the law will control.
    1. The Franchise Agreement and Disclosure Document provide for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec, 101 et seq.).
    1. The Franchise Agreement and Disclosure Document contain a covenant not to compete, which extends beyond the termination of the franchise. This provision may not be enforceable under California law.
    1. Both the governing law and choice of law for franchisees operating outlets located in California, will be the California Franchise Investment Law and the California Franchise Relations Act regardless of the choice of law or dispute resolution venue stated elsewhere. Any language in the franchise agreement or amendment to or any agreement to the contrary is superseded by this condition.
    1. Any interest rate charged to a California franchisee shall comply with the California Constitution. The interest rate shall not exceed either (a) 10% annually or (b) 5% annually plus the prevailing interest rate charged to banks by the Federal Reserve Bank of San Francisco, whichever is higher.
    1. The Franchise Agreement requires binding arbitration. The arbitration will occur in SWilmington, Delaware, with each party bearing its own costs. Prospective franchisees are encouraged to consult private legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code Section 20040.5, Code of Civil Procedure Section 1281, and the Federal Arbitration Act) to any provisions of a franchise agreement restricting venue to a forum outside the State of California.

Source: Item 23 — RECEIPTS (FDD pages 72–292)

What This Means (2025 FDD)

According to Brain Balance's 2025 Franchise Disclosure Document, any interest rate charged to a franchisee in California must adhere to the state's constitution. The maximum interest rate cannot exceed either 10% annually, or 5% annually plus the prevailing interest rate charged to banks by the Federal Reserve Bank of San Francisco, whichever of the two is higher.

This stipulation is included in the California Addendum to the Franchise Agreement, highlighting specific legal considerations for franchisees operating in California. This addendum acknowledges that California law will govern franchisees operating outlets in California, regardless of any conflicting stipulations in the standard franchise agreement.

Prospective Brain Balance franchisees in California should understand this interest rate limitation, especially if they anticipate needing financing from Brain Balance. It ensures that any financing arrangements comply with California law, protecting the franchisee from potentially excessive interest charges. Franchisees should consult with a legal or financial professional to fully understand the implications of this clause and how it may affect their investment and operational costs.

Disclaimer: This information is extracted from the 2025 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.