What must an Aw franchisee do if an audit reveals an understatement of gross revenue?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
If any inspection or audit discloses an understatement of the gross revenue of the Papa Ray's Pizza Restaurant, you agree to pay us, within ten (10) days after receipt of the inspection or audit report, the marketing contributions due, plus interest on the amount of the understatement (at the rate and on the terms provided in Paragraph 10.6) from the date originally due until the date of payment.
Further, if the inspection or audit is made necessary by your failure to furnish the reports, supporting records, other information or financial statements required by this Agreement, or to furnish those reports, records, information or financial statements on a timely basis, or discloses an understatement of the Gross Revenue of the Papa Ray's Pizza Restaurant of greater than two percent (2%) for any period, you agree to reimburse us for the cost of such inspection or audit, including, without limitation, the charges of attorneys and any independent accountants, and the travel expenses, room and board and applicable per diem charges for our employees.
The above remedies are in addition to all our other remedies and rights under this Agreement or under applicable law.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, if an inspection or audit reveals that a franchisee has understated their gross revenue, the franchisee must take specific actions. Within ten days of receiving the audit report, the franchisee is required to pay Aw the marketing contributions due on the understated amount. Additionally, the franchisee must pay interest on the understated amount, calculated from the original due date until the date of payment, with the interest rate and terms specified in Paragraph 10.6 of the franchise agreement.
Furthermore, Aw outlines additional financial responsibilities for franchisees under certain conditions. If the audit was necessitated by the franchisee's failure to provide required reports, records, information, or financial statements in a timely manner, or if the understatement of gross revenue exceeds two percent for any period, the franchisee is obligated to reimburse Aw for the costs associated with the audit. These costs include charges from attorneys and independent accountants, as well as travel expenses, room and board, and applicable per diem charges for Aw's employees involved in the audit.
It is important to note that these remedies available to Aw are in addition to any other rights and remedies Aw may have under the franchise agreement or applicable law. This provision underscores the importance of accurate financial reporting and timely compliance with Aw's reporting requirements to avoid potential financial penalties and legal ramifications.