What annual interest rate does Ascentium actually earn on each loan to Chesters franchisees?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
As of the issuance date of this disclosure document, the rate of interest you will pay on each loan from Ascentium is approximately 4.99% per annum, but Ascentium will actually earn an annual interest rate of approximately 8.50% on each loan because Ascentium will deduct an amount equal to approximately 5% to 10% of the total purchase price for the core equipment, signage, fixtures, and supplies from the amount paid to us as part of our agreement with Ascentium to reduce your annual interest rate from 8.50% to 4.99%, as adjusted from time to time. The interest rate available to franchisees on Ascentium loans may vary over time. We do not receive any fees from Ascentium for referring our franchisees to Ascentium for financing, but as noted above and in Item 10 the total purchase price you pay to us for the core equipment, signage, fixtures, and supplies will be approximately 5% to 10% higher than if you pay us cash or finance through a different third party.
Source: Item 10 — FINANCING (FDD pages 23–24)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, while franchisees may see an interest rate of approximately 4.99% per annum on loans from Ascentium, Ascentium actually earns a higher annual interest rate of approximately 8.50%. This discrepancy arises because Ascentium deducts an amount equal to approximately 5% to 10% of the total purchase price for the core equipment, signage, fixtures, and supplies from the amount paid to Chesters. This deduction is part of an agreement between Ascentium and Chesters, effectively reducing the franchisee's interest rate from 8.50% to 4.99%.
This arrangement means that while Chesters franchisees benefit from a lower stated interest rate, the overall cost of equipment, signage, fixtures, and supplies is higher when financing through Ascentium compared to paying cash or using a different financing source. The FDD indicates that the total purchase price paid to Chesters for these items will be approximately 5% to 10% higher when financed through Ascentium. This difference compensates Ascentium for the reduced interest rate offered to franchisees.
Prospective franchisees should carefully consider these financing terms and compare them with other financing options. While the lower interest rate may seem attractive, the increased cost of equipment could offset any savings. Franchisees should also be aware that the interest rate available on Ascentium loans may vary over time, and the rate is determined based on factors such as the loan term, loan amount, credit history, operating history, and other risk factors. Understanding these factors and their impact on the overall cost of financing is crucial for making an informed decision.
It is also important to note that Chesters does not receive any fees from Ascentium for referring franchisees for financing. However, the increased purchase price for equipment effectively serves as a form of compensation to Ascentium for providing the financing at a reduced interest rate to Chesters franchisees.