What payments must an Afuri Ramen Dumpling franchisee make immediately after an audit determines they are owed?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
We may audit your reports, books, statements, business records, cash control devices, and tax returns at any time during normal business hours. Audits will be conducted at our expense unless you understate the Revenue for any reported period or periods by more than 2 percent or unless you fail to deliver any required report of Revenue or any required financial statement in a timely manner. In the event of an understatement or failure to deliver, you will reimburse us for all audit costs. These will include, among other things, the charges of any independent accountant and the travel expenses, room, board, and compensation of our employees incurred in connection with the audit. You will immediately pay all Royalty Fees, Advertising Fees, all other fees and late payment charges that the audit determines are owed. These payments will not prejudice any other remedies we may have under this Agreement or by law.
Source: Item 6 — Other Fees (FDD pages 11–16)
What This Means (2024 FDD)
According to Afuri Ramen Dumpling's 2024 Franchise Disclosure Document, if an audit reveals that a franchisee owes money, the franchisee must immediately pay several fees. These include all Royalty Fees, Advertising Fees, other fees, and late payment charges that the audit determines are owed. This immediate payment obligation is in addition to any other legal remedies Afuri Ramen Dumpling might pursue under the Franchise Agreement or by law.
Furthermore, if the audit was triggered because the franchisee understated revenue by more than 2% or failed to submit required reports on time, the franchisee will also have to cover the costs of the audit itself. These audit costs encompass charges from any independent accountant involved, as well as travel expenses, room and board, and compensation for Afuri Ramen Dumpling's employees who participated in the audit.
In practical terms, this means an Afuri Ramen Dumpling franchisee needs to maintain accurate financial records and submit reports on time to avoid triggering an audit. If an audit does occur and reveals discrepancies, the franchisee must be prepared to make immediate payments for the outstanding amounts and potentially cover the audit expenses. This could create a significant financial strain, especially if the discrepancies are substantial or the audit costs are high. Franchisees should ensure they have sufficient cash flow to handle such situations.