What rate of interest will Lees Famous Recipe charge on underpaid royalties and advertising contributions?
Lees_Famous_Recipe Franchise · 2025 FDDAnswer from 2025 FDD Document
All Royalty Fees, Brand Cooperative Advertising Fund Fees, Local Advertising Expenditures (if applicable), Regional Marketing Cooperative Contributions (if applicable), Technology Fees and other amounts which you owe to us or our affiliates will bear interest after the due date at the lesser of: (1) eighteen percent (18%) per year; or (2) the maximum contract rate of interest permitted by law in the state in which the Restaurant is located.
You must pay to us a service charge of up to Five Hundred Dollars ($500) for each delinquent payment that you owe to us under this Agreement.
We have discretion to apply amounts due to us or any of our affiliates any payments received from you or any amount we owe you.
Source: Item 22 — CONTRACTS (FDD pages 69–70)
What This Means (2025 FDD)
According to Lees Famous Recipe's 2025 Franchise Disclosure Document, any late payments for Royalty Fees, Brand Cooperative Advertising Fund Fees, Local Advertising Expenditures (if applicable), Regional Marketing Cooperative Contributions (if applicable), Technology Fees and other amounts due to Lees Famous Recipe or its affiliates will incur interest. The interest rate will be the lesser of 18% per year or the maximum contract rate of interest permitted by law in the state where the restaurant is located.
This means a franchisee could face a significant financial penalty for failing to make timely payments. The 18% interest rate is substantially higher than typical commercial loan rates, so it's crucial for franchisees to manage their cash flow effectively and ensure all payments are made on time to avoid these charges. Franchisees should be aware of the specific laws in their state regarding maximum contract interest rates, as this could potentially override the 18% rate specified by Lees Famous Recipe.
In addition to interest on late payments, Lees Famous Recipe also charges a $500 service fee for each delinquent payment. This fee is not considered interest or a penalty but is intended to cover the increased administrative and management costs associated with late payments. This further emphasizes the importance of timely payments to avoid these additional costs. Franchisees should maintain meticulous records of all payments and due dates to prevent any late payment issues.
It is important to note that Lees Famous Recipe has the discretion to apply any payments received from the franchisee to any amounts due to them or their affiliates. This means that if a franchisee has multiple outstanding obligations, Lees Famous Recipe can decide how to allocate the payment, potentially prioritizing certain debts over others. Franchisees should clarify with Lees Famous Recipe how payments will be applied in cases where there are multiple outstanding balances to ensure proper allocation and avoid further complications.