Under what conditions may Craters & Freighters convert unpaid franchisee balances to a note receivable?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts and Notes Receivable
Accounts and notes receivable consist of current and past due franchise support fees and royalties. Late payments may be subjected to a one and a half percent interest fee per month on the total amount of late royalty payment. The Company received interest from royalty payments totaling $3,424 and $2,604 for the years ended December 31, 2024 and 2023, respectively.
At the Company's discretion, unpaid franchisee balances may be converted to a note receivable with payment terms between twenty-four and thirty-six months, accruing interest at six percent. As of December 31, 2024, there was $16,991 in outstanding notes receivable from franchisees relating to unpaid balances, of which $11,662 is due within one-year and $5,329 is due in 12-24 months. As of December 31, 2023, there were no Franchisee accounts with past due balances converted to notes receivable. Default on notes receivable will result in a termination of the related franchise agreements b
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to Craters & Freighters' 2025 Franchise Disclosure Document, the company has the discretion to convert unpaid franchisee balances into a note receivable. These notes have payment terms that range from 24 to 36 months and accrue interest at a rate of 6%.
As of December 31, 2024, Craters & Freighters had $16,991 in outstanding notes receivable from franchisees related to unpaid balances. Of this amount, $11,662 was due within one year, and $5,329 was due in 12-24 months. In contrast, as of December 31, 2023, there were no franchisee accounts with past due balances converted to notes receivable.
It is important to note that if a franchisee defaults on these notes receivable, Craters & Freighters has the right to terminate the franchise agreement. This policy highlights the importance of franchisees maintaining timely payments to avoid potential financial restructuring and possible termination of their franchise agreement.