Under what circumstances is an Alloy franchisee required to pay for an audit?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
| Name of Fee (1) | Amount | Date Due | Remarks |
|---|---|---|---|
| travel, lodging, meals, and wages | |||
| Insufficient Funds/Late Report Fee | $100 fee for late report/late payment, with fee increasing by $50 for each subsequent late report/late payment (up to a maximum of $250 for the fourth and any subsequent late report/late payment | On demand, if incurred | You must pay us this fee if there are not sufficient funds in your bank account to process payments owed to us and/or our affiliates or you are late in submitting reports. If you incur this fee three times in any 12 month period, we may terminate your Franchise Agreement without giving you the right to cure the default |
| Interest on Overdue Amounts | 12% per annum or the highest legal contract rate, whichever is less | Upon billing | Payable on all overdue amounts. Interest accrues from the original due date until payment is received in full |
| Audit | Cost of the audit (estimated to be between $1,000 and $5,000) | On demand | Payable only if the audit is conducted due to your failure to provide reports when required or if the audit shows you have understated any amount due to us (or Gross Sales) by 3% or more. You must als |
Source: Item 6 — OTHER FEES (FDD pages 15–20)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, a franchisee may be required to pay for an audit under specific circumstances. Alloy will require an audit if the franchisee fails to provide required reports or if an audit reveals that the franchisee has understated the amount due to Alloy, including Gross Sales, by 3% or more.
The cost of the audit is estimated to be between $1,000 and $5,000, and is due on demand. In addition to covering the cost of the audit, the franchisee is responsible for paying any understated amounts plus interest.
This policy is fairly standard in franchising, as franchisors need to ensure accurate reporting of financial information to calculate royalties and other fees. It is important for prospective Alloy franchisees to maintain accurate records and submit reports on time to avoid triggering an audit and incurring these additional expenses.