What interest rate does Chesters pay on its tenant improvement loan?

According to Chesters's 2025 Franchise Disclosure Document, the interest rate for the tenant improvement loan is calculated as the prime rate minus 0.25%. The loan is collateralized by certain business assets and matures in October 2028. In 2024, the outstanding balance for this loan was $540,771, while in 2023, it was $238,539.

This means that the actual interest rate a franchisee might pay on a tenant improvement loan from Chesters can fluctuate depending on changes to the prime rate. The prime rate is a benchmark interest rate determined by individual banks, often influenced by the federal funds rate set by the Federal Reserve. Therefore, if the prime rate increases, the interest rate on the tenant improvement loan will also increase, and vice versa.

Prospective franchisees should monitor the prime rate and understand how changes could affect their loan payments. Additionally, it's important to note that the loan is collateralized by business assets, meaning that Chesters has a claim on those assets if the franchisee defaults on the loan. Franchisees should carefully consider these factors and evaluate their ability to manage loan payments under varying interest rate conditions.

It is also important to note that the terms and amounts listed in the financial statement are not necessarily indicative of the terms and amounts that would have been incurred had comparable transactions been entered into with independent parties.