Under what conditions will an Annex Brands franchisee be required to reimburse Annex Brands for the cost of an audit?
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, a franchisee may be required to reimburse Annex Brands for the cost of an audit under specific circumstances. These circumstances include failure to furnish reports, supporting records, or other information as required by the Franchise Agreement, or failure to provide these items on a timely basis.
Additionally, Annex Brands will require reimbursement for audit costs if an audit or inspection reveals an understatement of Gross Receipts for any accounting period greater than 5%. A history of similar under-reporting offenses can also trigger this reimbursement requirement.
The reimbursement covers the cost of the audit or inspection, with a minimum charge of $500. This includes charges from independent accountants and/or contractors, as well as travel expenses, room and board, and compensation for Annex Brands employees involved in 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 paid in full.