What interest rate is applied to the monthly installments for the purchase of Option Assets by Cicis?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
- (3) Unless otherwise mutually agreed by us and you, the purchase price (minus customary pro ratas, including utilities and taxes, and minus the pay-off of any existing mortgage liens), if applicable, will be paid as follows: 10% at the time of closing and the remainder in 60 equal monthly installments of principal plus interest at a rate of interest per annum equal to the prime lending rate charged by Wells Fargo National Association or its successors in interest, determined as of the closing date with annual adjustments based on the prime rate charged on each anniversary date.
Source: Item 22 — CONTRACTS (FDD pages 64–65)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, if a franchisee purchases Option Assets and finances the purchase, the interest rate applied to the 60 equal monthly installments is the prime lending rate charged by Wells Fargo National Association or its successors. This rate is determined as of the closing date, with annual adjustments based on the prime rate charged on each anniversary date.
For a prospective Cicis franchisee, this means the interest rate on the financed portion of the Option Assets purchase is tied to a well-known benchmark, the Wells Fargo prime rate. This rate can fluctuate over the 60-month repayment period, potentially affecting the total cost of the assets. The initial rate is set at closing, and then adjusted annually based on the then-current prime rate.
This financing arrangement is fairly standard in franchise agreements when a franchisor offers financing. Using a widely recognized prime rate provides a transparent and market-driven interest rate, although the franchisee bears the risk of potential rate increases during the repayment term. Franchisees should monitor the prime rate and factor in potential fluctuations when budgeting for the asset purchase.