For the Chesters tenant improvement loan, what interest rate is payable?
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's 2025 Franchise Disclosure Document, the interest rate for the tenant improvement loan varied between 2023 and 2024. In 2024, the interest rate payable was at the prime rate minus 0.25%. In 2023, the interest rate payable was 8.25%.
For a prospective franchisee, this means the cost of borrowing for tenant improvements can fluctuate. The prime rate is a benchmark interest rate determined by banks, and it changes with economic conditions. A loan tied to the prime rate will see its interest costs rise and fall over time. In contrast, the 2023 rate of 8.25% was a fixed rate.
The tenant improvement loan matures in October 2028 and is collateralized by certain business assets. This means that Chesters could seize business assets if the loan is not repaid according to the terms of the agreement. Prospective franchisees should consider these factors when evaluating the financial implications of taking out a tenant improvement loan.