What is the maximum interest rate that Carls franchisees may be charged on overdue payments?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
If any payments by Franchisee due to CJR are not received by CJR by the date due, Franchisee, in addition to paying the amount owed, shall pay CJR interest on the amount owed from the date due until paid at the maximum rate permitted for indebtedness of this nature in the state in which the Franchised Restaurant is located, not to exceed 1.5% per fiscal period (as defined by CJR from time to time) or a portion of a fiscal period. Payment of interest by Franchisee on past due obligations is in addition to all other remedies and rights available to CJR pursuant to this Agreement or under applicable law.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, if a franchisee fails to make payments by the due date, Carls can charge interest on the overdue amount. This interest accrues from the date the payment was due until it is paid. The interest rate will be the maximum rate permitted for this type of debt in the state where the franchised restaurant is located. However, the interest rate will not exceed 1.5% per fiscal period, as defined by Carls.
This means that a Carls franchisee could face a significant financial penalty for late payments, depending on the state's regulations and how Carls defines its fiscal periods. The 1.5% cap provides some protection, but the actual cost will depend on the outstanding balance and the length of the fiscal period. It is important to note that this interest charge is in addition to any other remedies and rights Carls has under the Franchise Agreement or applicable law.
For a prospective Carls franchisee, this highlights the importance of maintaining timely payments to avoid incurring interest charges. Understanding the specific definition of 'fiscal period' used by Carls is crucial to accurately assess the potential cost of late payments. Franchisees should also be aware of their state's laws regarding maximum interest rates to fully understand their obligations and potential liabilities.