When does interest accrue on overdue amounts owed to Chatime?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
| Uniforms for First | $500 to $1,500 | $500 to $1,500 | $500 to $1,500 |
|---|---|---|---|
| Location | |||
| Initial Training for First | $5,000 | $5,000 | $5,000 |
| Fee(1) Type of | Amount | Due Date | Remarks |
| Audit Fee | Cost of audit | As invoiced | Payable if (i) we find that you have understated any amount you owe to us by more than 2%, or (ii) you fail to furnish reports, supporting records, other information or financial statements as required on a timely basis and we believe an audit is necessary. The Audit Fee includes accountants' fees, legal fees, and associated travel and accommodation expenses for our employees. |
| Interest Rate | The lesser of 1.5% per month or the highest rate allowed by law | As invoiced | If you fail to pay us any amount when due, you will pay interest on that amount at the Interest Rate from the time the amount should have been paid until it is paid. Interest accrues daily and may be capitalized by us. |
Source: Item 6 — Other Fees (FDD pages 13–17)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, if a franchisee fails to pay any amount when due to Chatime, interest will accrue on that overdue amount. The interest accrues from the time the amount should have been paid until it is actually paid. This means that interest charges begin accumulating immediately on any unpaid balance once the due date has passed.
The interest rate applied to these overdue amounts will be the lesser of 1.5% per month or the highest rate allowed by law. Chatime also has the right to capitalize the accrued interest, which means they can add the unpaid interest to the principal amount owed. This would then increase the base amount on which future interest is calculated, potentially leading to a snowball effect of increasing debt if payments are not made promptly.
This is a fairly standard practice in franchising and business in general. Franchisors typically charge interest on late payments to incentivize timely payments and to compensate them for the time value of money and the administrative costs associated with collecting overdue amounts. Franchisees should be aware of these terms and ensure they have sufficient cash flow management in place to meet their financial obligations to Chatime on time to avoid incurring these interest charges.