Does Annex Brands have the right to audit the Gross Receipts reported by the franchisee?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee (14) | Amount | Due Date | Remarks |
|---|---|---|---|
| Audit (14) | Cost of audit ($500 minimum) plus 1.5% per month interest or the highest rate allowed by law on underpayment. In addition, you must pay us a late fee of $35 per week. | 10 days after invoice | Payable to us if an inspection or audit is made necessary due to your failure to furnish reports, records, or other information to us on a timely basis, or if audit shows that you have understated any amount owed to us by more than 5% for any accounting period or if we discover a history of similar under reporting offenses. You must pay us by automatic bank draft. (3) |
Source: Item 6 — OTHER FEES (FDD pages 24–32)
What This Means (2025 FDD)
According to Annex Brands' 2025 Franchise Disclosure Document, Annex Brands retains the right to audit a franchisee's financial records under specific circumstances. If a franchisee fails to provide timely reports, records, or other information, or if an audit reveals that the franchisee has understated the amount owed to Annex Brands by more than 5% for any accounting period, or if there is a history of similar underreporting, Annex Brands may conduct an audit.
Should an audit be necessary due to these reasons, the franchisee is responsible for covering the cost of the audit, with a minimum charge of $500. Additionally, the franchisee must pay interest on the underpayment at a rate of 1.5% per month or the highest rate permitted by law. A late fee of $35 per week will also be imposed. These charges are payable to Annex Brands within 10 days after the invoice date, and payment must be made through automatic bank draft.
This audit provision encourages accurate and timely financial reporting from franchisees. Franchisees should maintain meticulous records and ensure accurate reporting of gross receipts to avoid triggering an audit and incurring additional expenses. The potential costs associated with an audit, including the audit fee, interest on underpayments, and late fees, can be significant, making compliance with reporting requirements crucial for franchisees.