Under what conditions are audit/inspection costs payable for an Aw franchise?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
| TYPE OF FEE1,3 | AMOUNT | DUE DATE | REMARKS |
|---|---|---|---|
| Audit/Inspection Costs | Cost of audit or inspection, including charges of professional advisors, and travel expenses, room and board and compensation or fees of our employees or agents | Upon billing | Payable if audit necessary because of your failure to file reports, supporting records, financial statements, or other required information in a timely fashion or if any audit reveals an understatement of the reported Gross Sales of greater than 2%. |
| Service Charge | Greater of $150 or the highest interest rate allowed by law not to exceed 1 ½%. | Upon billing | Payable on all overdue accounts due to us. |
Source: Item 6 — OTHER FEES (FDD pages 13–16)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, franchisees may be required to cover audit or inspection costs under specific circumstances. These costs encompass the expenses associated with the audit or inspection itself, including charges from professional advisors, alongside travel expenses, room and board, and compensation or fees for Aw's employees or agents involved in the process.
The primary trigger for these audit/inspection costs is the franchisee's failure to submit required reports, supporting records, financial statements, or other necessary information in a timely manner. This implies that maintaining accurate and punctual record-keeping is crucial for avoiding these additional expenses. Franchisees should ensure they understand and adhere to Aw's reporting requirements to prevent triggering an audit.
Furthermore, audit/inspection costs become payable if an audit reveals an understatement of reported Gross Sales exceeding 2%. This condition highlights the importance of accurate sales reporting. Gross Sales include all receipts from sales of food, beverages, merchandise, or services from the Papa Ray's Pizza Restaurant, whether for cash, exchange, or credit, excluding sales, use, or service taxes collected from customers, promotional discounts, authorized employee discounts, and complimentary products for promotion or charitable purposes. Franchisees must submit weekly reports of Gross Sales to Aw. Therefore, franchisees must diligently track and report their sales figures to avoid discrepancies that could lead to an audit and associated costs.
In summary, to avoid incurring audit/inspection costs, an Aw franchisee must consistently meet reporting deadlines and ensure the accuracy of their Gross Sales reports. Failure to do so could result in significant and unavoidable expenses.