Does the short-term advance from KHI to the Itan company accrue interest?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
s share common expenses. The Company leases office space from Evolv (see note 4). The Company and the entities under common control are not parties to any arrangements in which they are liable for mutual financial support nor events that would cause the Company to report a loss beyond any amounts reported as receivables.
During the years ended December 31, 2023 and 2022 KHI paid for expenses on behalf of the Company totaling $3,030 and $2,686 and the Company paid for expenses on behalf of KHI totaling $69,478 and $70,777, respectively. For the years ended December 31, 2023 and 2022, $181 and $0, respectively, is due to KHI and is reflected in accounts payable on the balance sheets.
In addition, as of December 31, 2023 and 2022 KHI owns five and eight franchise locations, respectively. Per the franchise agreement, KHI pays no royalty fees
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, a short-term advance from Kharsa Holdings, Inc. (KHI) to Itan does not accrue interest. Specifically, at December 31, 2023, Itan had a $250,000 receivable from KHI, and at December 31, 2022, the company had a $100,000 receivable. This amount is considered a short-term advance and is reflected as due from related parties on Itan's balance sheets.
This arrangement is significant for prospective Itan franchisees because it highlights the financial relationships between Itan and its related entities. The fact that the advance does not accrue interest suggests potentially favorable terms for KHI, which is under common control of Itan's owner.
Franchisees should be aware of these related-party transactions, as they can impact the overall financial health and stability of Itan. Understanding the terms of these advances, even if they are interest-free, is crucial for assessing the financial risks and benefits associated with investing in an Itan franchise. It is advisable for potential franchisees to seek clarification from Itan regarding the purpose, duration, and repayment terms of such advances to related parties.