What is the interest rate charged by 1 800 Packouts on underpaid amounts discovered during an audit?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
To determine whether you are complying with this Agreement, we will have the right at any time during business hours, and upon reasonable notice to you, to (a) inspect your offices or any other facility or vehicles used by you and (b) inspect and audit, or cause to be inspected and audited, the Franchised Business and accounting records, sales and income tax returns, and other records of the Franchised Business and any Mitigation Business in which you have any interest or involvement in whatsoever. You must cooperate with our representatives and any independent accountants hired by us to conduct any such inspection or audit. If the audit or any other inspection should reveal that any payments to us have been underpaid, then you shall immediately pay to us the amount of the underpayment plus interest from the date such amount was due until paid at the rate of 18% per annum or the maximum rate permitted by law, whichever is less. If the inspection discloses an underpayment of 3% or more of the amount due for any period covered by the audit, you shall, in addition reimburse us for any and all costs and expenses connected with the inspection (including, without limitation, travel expenses and reasonable accounting and attorneys' fees). The foregoing remedies shall be in addition to any other remedies we may have.
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to 1 800 Packouts' 2025 Franchise Disclosure Document, if an audit reveals that a franchisee has underpaid amounts owed to 1 800 Packouts, the franchisee must immediately pay the underpayment. 1 800 Packouts will also charge interest on the underpaid amount from the date it was originally due until it is paid. The interest rate is set at 18% per annum, or the maximum rate permitted by law, whichever is less.
In addition to the underpayment and interest, 1 800 Packouts has the right to charge the franchisee for all costs and expenses associated with the inspection if the underpayment is 3% or more of the amount due for any period covered by the audit. These costs include travel expenses, accounting fees, and attorney's fees.
This policy incentivizes franchisees to maintain accurate records and make timely payments to 1 800 Packouts. Franchisees should ensure they have robust accounting practices to avoid underpayments and potential audit-related expenses. The remedies described are in addition to any other remedies that 1 800 Packouts may have.