Under what conditions will an Aw franchisee be required to reimburse Aw for the cost of an inspection or audit?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
- 13.4 Our Right to Inspect the Papa Ray's Pizza Restaurant.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, a franchisee may have to reimburse Aw for inspection or audit costs under specific circumstances. If an audit reveals that the franchisee understated their gross revenue, the franchisee must pay any due marketing contributions, plus interest on the understated amount. The interest is calculated from the original due date until the payment date, as detailed in Paragraph 10.6 of the agreement.
Additionally, Aw may require the franchisee to cover the costs of an inspection or audit if the franchisee fails to provide required reports, records, information, or financial statements on time. Reimbursement is also required if an audit reveals that the franchisee understated their Gross Revenue by more than two percent (2%) for any period. These costs can include charges from attorneys and independent accountants, as well as travel expenses, room and board, and per diem charges for Aw's employees.
Furthermore, if Aw or a qualified third party agent rates the franchisee's premises or operations as unacceptable based on an inspection, the franchisee must reimburse Aw for all costs and expenses related to the inspection, including compensation for the third-party agent. If subsequent inspections within thirty (30) days continue to result in unacceptable ratings, the franchisee remains responsible for covering all associated costs and expenses. These remedies are in addition to any other legal options Aw may pursue if the franchisee fails to comply with the terms of the franchise agreement.
This means that Aw franchisees must maintain accurate financial records and comply with all reporting requirements to avoid potential reimbursement costs. Franchisees should ensure they understand and meet Aw's standards for premises and operational ratings to prevent incurring additional inspection fees. This policy incentivizes franchisees to maintain compliance and transparency in their business operations.