Under what condition is a 7 Brew franchisee required to pay audit fees?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
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| Column 1 | Column 2 | Column 3 | Column 4 |
|---|---|---|---|
| Type of Fee(1, 6) | Amount(2) | Due Date | Remarks |
| Supplemental Training You Request to be Provided at Your Store | Up to $1,500 per trainer per day plus expenses | As incurred | If you request training courses or programs to be provided locally, you must pay our then-current training fee and our training personnel's travel and living expenses. |
| Testing and Evaluation Costs | Actual testing/evaluation costs incurred (amount depends on circumstances, including supplier's location, testing required, and item involved) | As incurred | Covers our actual costs of testing new products/services or inspecting new suppliers you propose. |
| Relocation | $5,000 plus reasonable costs we incur | As incurred | Due only if you relocate Store with our approval. |
| Audit | Reimbursement of cost of inspection or audit, including legal fees and independent accountants' fees, plus travel expenses, room and board, and compensation of our employees (amount depends on nature and extent of your non compliance) | As incurred | Due if you fail to report or understate Gross Sales by 2% or more. |
| Interest | Lesser of 1.5% per month or highest commercial contract interest rate law allows | When invoiced | Due on past due amounts. |
| Administrative | $100 | When invoiced | Due for each late or dishonored |
| Fee |
Source: Item 6 — OTHER FEES (FDD pages 16–23)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, a franchisee will be required to pay for the cost of an audit if they fail to report or understate their Gross Sales by 2% or more. This audit fee covers the cost of the inspection or audit, including legal and independent accountant fees, travel expenses, room and board, and compensation for 7 Brew employees involved in the audit. The amount a franchisee pays will depend on the nature and extent of their non-compliance.
This condition is fairly standard in franchising, as franchisors need to ensure accurate reporting of gross sales to calculate royalties and brand fund contributions correctly. Underreporting sales impacts not only the franchisor's revenue but also the contributions to the brand fund, which supports marketing and other initiatives that benefit all franchisees.
For a prospective 7 Brew franchisee, this means maintaining meticulous records of all sales and ensuring accurate reporting. Failure to do so can result in significant audit fees in addition to any potential penalties for underreporting. It is crucial to understand what constitutes Gross Sales according to the Franchise Agreement and to implement systems to track and report sales accurately. Franchisees should also clarify with 7 Brew what documentation is acceptable to demonstrate accurate sales reporting and what triggers an audit.