Under what conditions will an Anago franchisee be required to reimburse Anago for audit costs?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee 1 | Amount | Due Date 2 | Remarks |
|---|---|---|---|
| Audit | Varies | Immediately upon receipt of invoice. | If an audit by us discloses an understatement of Gross Revenues in excess of 2% for any period or periods, you will be required to reimburse us for all costs of the audit in addition to paying past due Royalties, Advertising Fees (when imposed) plus any late |
Source: Item 6 — OTHER FEES (FDD pages 12–19)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, an Anago franchisee will be required to reimburse Anago for the costs of an audit under specific circumstances. If an audit conducted by Anago reveals that the franchisee has understated their Gross Revenues by more than 2% for any period, the franchisee is responsible for covering all costs associated with the audit. This is in addition to paying any past due Royalties, Advertising Fees (if applicable), and late fees.
This policy incentivizes accurate financial reporting by Anago franchisees. Underreporting revenues not only deprives Anago of its rightful royalties and fees but also distorts the financial picture of the franchise system as a whole. By imposing the audit costs on franchisees who significantly underreport, Anago aims to deter such behavior and ensure the integrity of its financial data.
For a prospective Anago franchisee, this means maintaining meticulous and accurate records of all Gross Revenues. It also highlights the importance of understanding how Gross Revenues are defined in the Subfranchise Rights Agreement, as even unintentional errors could lead to significant financial penalties if they exceed the 2% threshold. Franchisees should ensure they have systems in place to track and report revenues accurately to avoid triggering an audit and potential reimbursement of audit costs.