What is the interest rate for Chesters' tenant improvement loan?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
he Agreement), as amended, with a financial institution and has the following outstanding debt:
| 2024 | 2023 | |
|---|---|---|
| Term loan – interest is payable at 7.25%. | $ 718,235 | $ 1,084,858 |
| The note matures in December 2028, collateralized | ||
| by certain business assets | ||
| Term loan – interest is payable at prime rate minus 0.25%. | 732,745 | 1,428,910 |
| Matures in October 2028, collateralized by | ||
| certain business assets | ||
| Tenant improvement loan – interest is payable at | 540,771 | 238,539 |
| prime rate minus 0.25%. |
Source: Item 21 — **FINANCIAL STATEMENTS (FDD page 48)
What This Means (2025 FDD)
According to Chesters' 2025 Franchise Disclosure Document, the interest rate for the tenant improvement loan is variable. For 2024, the interest rate is set at the prime rate minus 0.25%. In 2023, the interest rate was 8.25%.
For a prospective Chesters franchisee, this means the cost of borrowing for tenant improvements can fluctuate depending on the prime rate. A lower prime rate would result in a lower interest payment, while a higher prime rate would increase the cost of the loan. This variability introduces an element of risk, as budgeting for loan repayments becomes less predictable.
It is important to note that the tenant improvement loan matures in October 2028 and is collateralized by certain business assets. Franchisees should carefully consider the implications of using business assets as collateral, as this could impact their financial stability if they encounter difficulties in repaying the loan. Prospective franchisees should consult with financial advisors to assess the potential risks and benefits associated with this type of financing.