What late fee will Annex Brands charge per week for underreporting of greater than 5%?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
n or audit. In the event any such inspection or audit will disclose an understatement of the Gross Receipts of the Center, Franchisee will pay to Franchisor, within 10 days after receipt of the inspection or audit report, the royalty fees and marketing fees due on the amount of such understatement, plus interest at the rate of 1.5% per month (or the maximum rate allowed by law on underpayment) from the date originally due until the date of payment. Further, if an inspection or audit is made necessary by the failure of Franchisee to furnish reports, supporting records, or other information, as required by this Agreement, or to furnish reports, records, and information on a timely basis, or if an understatement of Gross Receipts for any accounting period is determined by the audit or inspection to be greater than 5%, or if Franchisor discovers a history of similar under-reporting offenses, Franchisee also will reimburse Franchisor for the cost of the audit or inspection (minimum $500), including the charges of any independent accountants and/or contractors and the travel expenses, room and board, and compensation of employees of Franchisor performing the audit. A late fee of $35 per week will be charged from December 31st of each year showing underreporting of greater than 5%, or from the end of the audit period for a partial year audited, calculated until the audit fees are p
Source: Item 22 — Contracts (FDD pages 109–110)
What This Means (2025 FDD)
According to Annex Brands' 2025 Franchise Disclosure Document, if an audit reveals that a franchisee has underreported gross receipts by more than 5%, the franchisee will be charged a late fee of $35 per week. This late fee starts accruing from December 31st of the year in which the underreporting occurred. If the audit covers only a partial year, the late fee is calculated from the end of the audit period.
This fee continues to accumulate until the audit fees are paid in full. In addition to the late fee, the franchisee is responsible for paying the royalty and marketing fees due on the underreported amount, along with interest at a rate of 1.5% per month (or the maximum rate allowed by law) from the original due date until the payment date.
Furthermore, Annex Brands may also require the franchisee to reimburse the cost of the audit itself, with a minimum charge of $500. This reimbursement covers the expenses of independent accountants or contractors, as well as the travel, room, board, and compensation of Annex Brands employees involved in the audit. This policy is in place to ensure accurate reporting and to cover the costs associated with investigating and rectifying underreporting issues.