Under what conditions must an All County franchisee reimburse audit expenses?
All_County Franchise · 2025 FDDAnswer from 2025 FDD Document
- 17.6. Proof of Expenditure. You are required to provide proof of payment for the Business Promotion, as outlined in Article 17.5.
We may periodically review your books and records to verify your expenditures for advertising and promotion as required by this Agreement.
Proof of expenditures is your burden.
If we determine that you have not spent the requisite amounts, we may require you to pay such unexpended amounts into the Advertising Fund.
- 20.4.5. Transfer Fees. You must pay us a transfer fee in the amount of Ten Thousand Dollars ($10,000) at the time of the proposed transfer.
In addition to the transfer fee, you agree to pay us our reasonable legal fees and administrative costs incurred, and our reasonable out-of-pocket expenses, including, without limitation, travel, meals, lodging and other investigative expenses involved in meeting with or qualifying the transferee.
If the proposed transfer is among your owners or first or second degree relatives, the transfer fee will be waived, although you are required to reimburse us for any reasonable legal and administrative costs we incur in connection with the transfer.
Source: Item 23 — Receipts (FDD pages 43–157)
What This Means (2025 FDD)
According to All County's 2025 Franchise Disclosure Document, franchisees may be required to cover audit expenses under specific circumstances related to advertising and transfers.
Specifically, if All County reviews a franchisee's books and records to verify their advertising and promotion expenditures and determines that the franchisee has not spent the required amounts, All County may require the franchisee to pay the unexpended amounts into the Advertising Fund. This implies that if an audit reveals a shortfall in advertising spending, the franchisee might effectively bear the cost of the audit by having to make up the difference.
Additionally, in the context of franchise transfers, the franchisee is responsible for reimbursing All County's legal and administrative costs associated with the transfer, as well as reasonable out-of-pocket expenses like travel, meals, lodging, and investigative costs incurred while meeting with or qualifying the transferee. However, these transfer fees are waived if the transfer occurs among the franchisee's owners or first or second-degree relatives, though reimbursement for reasonable legal and administrative costs is still required.
It is important for prospective All County franchisees to understand these conditions, as they can significantly impact their financial obligations. Franchisees should maintain meticulous records of their advertising expenditures and carefully consider the costs associated with potential franchise transfers.