What happens if an All States M.E.D. franchisee understates royalty fees by more than 2%?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
- (l) submits to Franchisor on two (2) or more separate occasions at any time during the term of the Franchise any reports or other data, information or supporting records that understate any Royalty Fee or any other fees owed to Franchisor by more than two percent (2%) for any accounting period and Franchisee is unable to demonstrate that such understatements resulted from inadvertent error;
Source: Item 23 — RECEIPTS (FDD pages 44–174)
What This Means (2024 FDD)
According to All States M.E.D.'s 2024 Franchise Disclosure Document, submitting reports that understate royalty fees or other fees owed to All States M.E.D. by more than 2% for any accounting period can lead to termination of the franchise agreement if the franchisee cannot prove the error was inadvertent. This applies if the franchisee submits such reports on two or more separate occasions during the franchise term.
This means that if an All States M.E.D. franchisee makes repeated errors in their financial reporting that significantly understate their royalty obligations, All States M.E.D. has grounds to terminate the franchise agreement. The franchisee has the opportunity to demonstrate that the understatements were due to unintentional errors, which could prevent termination.
This provision highlights the importance of accurate financial reporting and record-keeping for All States M.E.D. franchisees. Franchisees should implement robust accounting practices and regularly review their financial data to ensure compliance with the reporting requirements outlined in the franchise agreement. Failing to do so could put their franchise at risk.