What is the maximum interest rate Chatime can charge on overdue amounts?
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, Chatime will charge interest on the overdue amount. The interest rate will be the lesser of 1.5% per month or the highest rate allowed by law. This interest accrues daily and may be capitalized by Chatime, meaning the unpaid interest can be added to the principal amount owed, increasing the total debt.
For a prospective Chatime franchisee, this means that late payments can result in significant additional costs. The 1.5% monthly interest rate is equivalent to an annual interest rate of 18%, which is a substantial penalty. Franchisees should ensure timely payments to avoid these charges. The fact that interest accrues daily further emphasizes the importance of prompt payment, as even a short delay can increase the amount owed.
It is also important to note that the interest rate is capped at the highest rate allowed by law. This provides some protection to the franchisee, as Chatime cannot charge an interest rate that exceeds legal limits, even if 1.5% per month would be lower. Franchisees should be aware of the applicable legal limits on interest rates in their jurisdiction to ensure compliance and protect themselves from excessive charges. This is a fairly standard practice in franchising, as franchisors typically charge interest on overdue amounts to encourage timely payments and compensate for the administrative costs and potential financial losses associated with late payments.