What happens if the annual statement of Gross Revenue for a 1-800-GOT-JUNK? franchise discloses an underpayment of Royalties?
1_800_Got_Junk Franchise · 2025 FDDAnswer from 2025 FDD Document
Within ninety (90) days after the end of each calendar year, Franchisee shall submit to Franchisor (in electronic form whenever possible) the following financial information relating to the Franchised Business in respect of such calendar year, which information shall be certified as correct by Franchisee and prepared on a review engagement basis by a Certified Public Accountant retained by Franchisee at Franchisee’s sole cost and expense:
(a) a statement of Gross Revenue for such year as finally adjusted and reconciled after the close and review of Franchisee’s books and records for the year. If such statement discloses any underpayment of Royalties for such year, then Franchisee shall pay to Franchisor, at the time of submitting such statement, the amount of such underpayment. Any overpayment disclosed by such statement shall be credited to Franchisee’s Royalty account by Franchisor once verified and accepted by Franchisor;
Source: Item 22 — Contracts (FDD page 24)
What This Means (2025 FDD)
According to the 2025 1-800-GOT-JUNK? Franchise Disclosure Document, franchisees are required to submit annual financial information to the franchisor within 90 days after the end of each calendar year. This includes a statement of Gross Revenue, which must be certified as correct and prepared by a Certified Public Accountant at the franchisee's expense.
If the annual statement of Gross Revenue reveals an underpayment of royalties for that year, the franchisee is obligated to pay the amount of the underpayment to 1-800-GOT-JUNK? at the time of submitting the statement. Conversely, if the statement indicates an overpayment, the franchisor will credit the overpayment to the franchisee's royalty account, but only after verification and acceptance by 1-800-GOT-JUNK?.
This process ensures that royalty payments are accurately reconciled on an annual basis. Franchisees should ensure their financial records are meticulously maintained and reviewed by a qualified CPA to avoid potential underpayment issues and to facilitate accurate reporting to 1-800-GOT-JUNK?. The franchisor also retains the right to inspect and audit the franchisee's records to verify the accuracy of reported financial information.