What is the interest rate applied to late payments by a Gold Star franchisee?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
All amounts payable by FRANCHISEE to the COMPANY or any affiliate under or in connection with this Agreement shall be made without set-off or deduction for any reason whatsoever (including but not limited to any alleged breach by the COMPANY of any obligations to FRANCHISEE), and if not paid when due shall bear interest from the date due until paid at the rate of one and one-half percent (1.5%) per month, or the maximum rate permitted by law, whichever is less.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, any amounts that a franchisee owes to Gold Star or its affiliates that are not paid when due will incur interest. This interest is calculated from the date the payment was originally due until it is paid in full. The interest rate applied is one and one-half percent (1.5%) per month, or the maximum rate permitted by law, whichever is less.
In practical terms, this means that if a Gold Star franchisee is late on any payment, they will be charged interest on the outstanding balance. The 1.5% monthly interest rate equates to an annual interest rate of 18%, which is relatively high compared to standard bank loan interest rates. However, the agreement specifies that the interest rate will be capped at the maximum rate permitted by law if that rate is lower than 1.5% per month.
This provision is fairly standard in franchise agreements, as it incentivizes franchisees to make timely payments. Franchisees should be aware of this late payment interest rate and ensure they have sufficient funds to cover all payments to Gold Star to avoid incurring these charges. Additionally, Gold Star also charges a late payment administrative fee of $100, further increasing the cost of late payments.