What is the maximum interest rate that can be charged on late payments from a Gold Star franchisee?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
ansfer, and any insufficiency will be considered a default in payment pursuant to Section 14.5.1 of this Agreement. FRANCHISEE will promptly reimburse the COMPANY for any charges incurred by the COMPANY due to a shortage of funds in FRANCHISEE's account.
- 8.3.4 FRANCHISEE will maintain a single bank account for its business operations and for the payment of continuing franchise fees, Brand Building Fees or any other amounts payable to the COMPANY.
- 8.4 Payments Unconditional. 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
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, franchisees are subject to interest on late payments. Specifically, if any amount payable by the franchisee to Gold Star or its affiliates is not paid when due, it will accrue interest from the due date until it is paid. The interest rate will be 1.5% per month, or the maximum rate permitted by law, whichever is less.
In practical terms, this means a Gold Star franchisee could face a substantial financial penalty for failing to make timely payments. The 1.5% monthly interest rate equates to an annual interest rate of 18%, which is significantly higher than typical bank loan interest rates. However, the clause "or the maximum rate permitted by law, whichever is less" protects the franchisee in states with usury laws that set a lower maximum interest rate.
In addition to interest, Gold Star also charges a $100 administrative fee for late payments. The FDD states that Gold Star's entitlement to both the late payment interest and the administrative charge is in addition to its right to terminate the franchise agreement or pursue other remedies for the late payment. Therefore, franchisees need to prioritize timely payments to avoid these financial and legal repercussions.
Gold Star also has the discretion to apply any payments from the franchisee to past due obligations in whatever manner it deems appropriate. This means that even if a franchisee makes a payment, Gold Star can choose to apply it to older debts first, potentially leaving more recent obligations unpaid and subject to late fees and interest. Franchisees should maintain meticulous records of their payments and outstanding balances to avoid any disputes or misunderstandings with Gold Star.