Under what circumstances will an Azal Coffee franchisee be required to pay for the costs of an audit conducted by Azal Coffee?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
yees (upon their hiring) and customers to authorize us to use 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.
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
Based on the 2024 Franchise Disclosure Document, the circumstances under which an Azal Coffee franchisee would be required to cover the costs of an audit initiated by Azal Coffee are not explicitly detailed in the provided excerpts. The FDD excerpts do mention the franchisee's obligations regarding financial reporting and record-keeping, as well as the franchisor's right to inspect these records. However, the excerpts do not specify the conditions that would trigger an audit at the franchisee's expense.
While the FDD excerpts outline the franchisee's responsibility to maintain accurate financial records and provide them to Azal Coffee, they lack specific information on audit cost allocation. Item 10.1 states that franchisees must use standard reporting systems, provide statements of gross sales, tax returns, and financial statements, and failure to do so may result in liquidated damages. Item 10.2 requires franchisees to keep complete and correct books of account and business records. Item 10.3 allows for inspection of these records. However, none of these sections clarify when the franchisee would bear the cost of an audit.
A prospective Azal Coffee franchisee should seek clarification from the franchisor regarding the specific conditions under which they would be responsible for covering the costs of an audit. This inquiry should include understanding what triggers an audit, the process for conducting the audit, and the potential costs involved. Understanding these conditions is crucial for financial planning and risk assessment before entering into a franchise agreement with Azal Coffee.