For an Embassy Suites franchise, what is the maximum lawful interest rate that can be charged on overdue payments?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
If a termination of the Franchise Agreement occurs for any reason; or a Transfer occurs, and the transferee does not assume Maker's obligation under this Note and cause a replacement co-maker acceptable to Holder to assume the obligations of any co-maker under this Note in a writing acceptable to Holder before the closing of such Transfer before the principal is forgiven or repaid, then the outstanding, unamortized principal balance of this Note shall be immediately due and payable without further notice, demand or presentment. If this Note is accelerated under this paragraph, and is not paid within ten (10) days after it is due, the outstanding principal balance shall bear simple interest from its due date until paid at a rate equal to the lesser of eighteen percent (18%) per annum or the highest rate allowed by applicable law. The outstanding principal balance of this Note shall be payable in lawful money of the United States of America at 7930 Jones Branch Dr., Suite 1100, McLean, VA 22102, Attention: General Counsel, or at such other place as Holder may periodically direct by written notice to Maker. Any payments shall be first applied to collection costs and expenses, if any, incurred by the Holder, second to any accrued but unpaid interest and last to principal. Maker has the right to prepay this Note, in whole or in part, at any time, without premium or penalty but amounts paid or prepaid may not be re-disbursed. Prepayments of principal will be applied without notation on this Note. Maker's obligation to pay this Note shall be absolute and unconditional, and all payments shall be made without setoff, deduction, offset, recoupment or counterclaim.
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to Embassy Suites' 2025 Franchise Disclosure Document, the maximum interest rate that can be charged on overdue payments related to a specific note is the lesser of 18% per annum or the highest rate allowed by applicable law. This rate applies if the note is accelerated due to a termination of the Franchise Agreement or a transfer where the transferee does not assume the maker's obligation, and the outstanding principal balance is not paid within ten days after it is due.
This interest rate only applies to the outstanding principal balance of a specific note under specific circumstances. It is important to note that this rate may not apply to all types of overdue payments within the franchise agreement. The payments shall be first applied to collection costs and expenses, if any, incurred by the Holder, second to any accrued but unpaid interest and last to principal.
Prospective franchisees should be aware of these conditions and ensure they understand the implications of failing to meet payment obligations. It is advisable to seek legal counsel to fully understand the terms of the franchise agreement and any related agreements, including the specific note mentioned, to avoid potential financial penalties.