Does Craters & Freighters charge interest on the outstanding balance owed by Craters & Freighters Platinum, and if not, why?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
security agreement.
Note 6: Related Party Transactions
The Company provides shared services and advances to a related party, Craters & Freighters Platinum, through common ownership. Total amounts paid to the Company for shared services during the year ended December 31, 2024 totaled $175,268, of which, $41,921 is shown in the financial statements as a reduction of rent expense. During the year ended December 31, 2023 total amounts paid to the Company for shared services totaled $307,386, of which, $17,386 is shown in the financial statements as a reduction of rent expense. As of December 31, 2024 and 2023, the Company was owed $0 and $356,391, respectively from Craters & Freighters Platinum. Due to the short-term nature of these b
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, Craters & Freighters provides shared services and advances to Craters & Freighters Platinum, a related party through common ownership. As of December 31, 2024, Craters & Freighters was owed $0 from Craters & Freighters Platinum. In the previous year, as of December 31, 2023, the amount owed was $356,391.
Craters & Freighters does not charge interest on the outstanding balance owed by Craters & Freighters Platinum. The reason for this is explicitly stated as being due to the short-term nature of these borrowings. This suggests that the advances and shared services are intended to be settled quickly, and therefore, interest charges are not applied.
For a prospective franchisee, this related-party transaction indicates that Craters & Freighters engages in financial dealings with affiliated entities. While the FDD states that interest is not charged due to the short-term nature of the borrowings, it is important for potential franchisees to understand the extent and terms of these related-party transactions. Understanding the financial relationships between Craters & Freighters and its related parties can provide a more comprehensive view of the company's financial health and practices.