Is the late fee charged by Fly Fitness considered a penalty?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
anchisor reserves the right to modify the method and frequency of collection of the Royalty Fee and Brand Fund Contribution upon ninety (90) days' prior notice to Franchisee.
- 6.2. Late Fee. If the Royalty Fee, Brand Fund Contribution, or any Gross Revenue Reports are not received by Franchisor as required by this Agreement, Franchisee shall pay to Franchisor, in addition to the overdue amount, a late fee of Seventy-Five Dollars ($75.00). This late fee is reasonably related to Franchisor's costs resulting from the delay in payment and/or receipt of any report, is not a penalty, and is in addition to any other remedy available to Franchisor under this Agreement for Franchisee's failure to pay the Royalty Fee, the Brand Fund Contribution, and/or submit Gross Revenue Reports in accordance with the terms of this Agreement.
- 6.3. Interest. Any and all amounts that shall become due and owing from Franchisee to Franchisor under the terms hereof shall bear interest from the date due until paid at the rate of 18% per annum or at the highest rate permitted by law, whichever is lower.
- 6.4. Non-Sufficient Funds Fee. In the event any of Franchisee's checks are returned, or an electronic funds transfer from Franchisee's bank account is denied, for insufficient funds, Franchisee shall pay Franchisor, in addition to the amount due, a non-sufficient funds fee of One Hundred Dollars ($100.00) per occurrence. These non-sufficient funds fee is
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the late fee of $75 charged for overdue Royalty Fees, Brand Fund Contributions, or Gross Revenue Reports is explicitly stated not to be a penalty. Instead, Fly Fitness considers this late fee to be reasonably related to their costs resulting from the delay in payment or receipt of the required reports. This fee is in addition to any other remedies Fly Fitness has available under the Franchise Agreement for the franchisee's failure to pay the Royalty Fee, the Brand Fund Contribution, and/or submit Gross Revenue Reports according to the agreement terms.
In addition to the late fee, any amounts due from the franchisee to Fly Fitness under the terms of the agreement will bear interest from the due date until paid. The interest rate is set at 18% per annum or at the highest rate permitted by law, whichever is lower. Fly Fitness also charges a non-sufficient funds fee of $100 per occurrence if a franchisee's check is returned or an electronic funds transfer is denied due to insufficient funds. This fee, like the late fee, is not considered a penalty but is intended to cover the costs associated with the delayed and declined payment.
Prospective franchisees should understand that these fees and interest charges are in place to ensure timely payments and compliance with reporting requirements. While the late fee is not considered a penalty, it is an additional cost that franchisees will incur if they fail to meet payment deadlines or if their payments are rejected due to insufficient funds. Franchisees should factor these potential costs into their financial planning and ensure they have sufficient funds to cover all fees and expenses associated with operating a Fly Fitness franchise.