What are the circumstances under which Azal Coffee might require an audit (Item 6) and what are the franchisee's obligations regarding financial reporting (Item 9)?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
e any Work as contemplated in this Section.
ARTICLE 10 - REPORTS, ACCESS AND AUDIT, CUSTOMER LISTS
10.1 Reports and Financial Statements.
You must use the standard reporting systems and forms specified by us. You must submit to us a complete statement of Gross Sales and other information specified by us for the reporting periods and on the forms specified by us. You must provide us with copies of all sales or similar tax returns, annual income tax returns, monthly profit and loss statements, monthly balance sheets, monthly inventory statements and annual financial statements. You must provide copies of monthly statements or reports to us within fifteen (15) days of the end of each month and copies of annual statements or reports within thirty (30) days of the end of your fiscal year. You must use the "chart of accounts" designated by us from time to time when recording financial information and preparing financial statements and other reports. We may specify other requirements relating to reporting in the Brand Standards Manual. Your failure to timely provide required reports or financial statements may result in liquidated damages amounts being assessed against you under Section 15.7.
You agree that we may receive information directly from suppliers and you authorize your suppliers to provide information directly to us. You agree to sign separate authorizations or additional documents requested by suppliers or that we deem necessary for us to obtain information directly from suppliers.
We may disclose your financial records in future Franchise Disclosure Documents and reporting analyses presented to third parties and to our actual and potential lenders. Also, we may share information in your reports and financial statements with other franchisees or prospective franchisees in the ordinary course of our business as a tool to improve the Azal Coffee franchise
system's volume of business and as required to support any financial performance representation we make in our Franchise Disclosure Document.
10.2 Records.
You must keep complete and correct books of account, business records, and records of Gross Sales, in accordance with the procedures specified by us and in accordance with generally accepted accounting principles. You must keep all of your business records for the greater of: (a) seven (7) years; or (b) the time period specified by any applicable federal, state, or local law or regulation.
10.3 Inspection; Shopping Service.
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, franchisees must adhere to specific financial reporting requirements. Azal Coffee requires franchisees to use standard reporting systems and forms. Franchisees must submit complete statements of Gross Sales and other information, along with copies of sales tax returns, annual income tax returns, monthly profit and loss statements, balance sheets, inventory statements, and annual financial statements. Monthly reports are due within fifteen days of the month's end, while annual reports are due within thirty days of the fiscal year's end. Franchisees must also use Azal Coffee's designated chart of accounts. Failure to provide these reports on time may result in liquidated damages.
Azal Coffee may receive information directly from suppliers, and franchisees must authorize their suppliers to provide this information. Azal Coffee may disclose franchisees' financial records in future Franchise Disclosure Documents, reporting analyses to third parties and lenders, and may share information with other franchisees or prospective franchisees to improve the Azal Coffee franchise system or support financial performance representations. Franchisees must maintain complete and correct books of account, business records, and records of Gross Sales according to generally accepted accounting principles and Azal Coffee's procedures for either seven years or as required by law.
The Franchise Disclosure Document does not specify the circumstances under which Azal Coffee might require a franchisee to conduct a formal audit. A prospective franchisee should seek clarification from Azal Coffee regarding the specific conditions that would trigger an audit requirement, including who bears the cost of such an audit and the process for selecting an auditor. Understanding these potential obligations is crucial for managing financial responsibilities and planning for unforeseen expenses as an Azal Coffee franchisee.