Under what condition does Bang Cookies charge a franchisee for the cost of an audit?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
| POS Fee | Currently $165 per month | As incurred | |
|---|---|---|---|
| Self-Serve Kiosk Fee | $279 per month or for 2 or more kiosks, $199 per month per kiosk | As incurred | |
| Interest | 18% per annum from due date | On demand | Payable on all overdue amounts, fees, charges, and payments due to us under the Franchise Agreement. Interest rate cannot exceed legal rate allowed by law and may be adjusted to reflect same. |
| Reporting Non-Compliance | $150 per occurrence | 14 days of invoice | Payable for failure to timely submit Royalty and Activity Reports, and other reports and financial statements as required under Franchise Agreement. |
| Operations Non-Compliance | $450 to $1,000 per occurrence | 14 days of invoice | Payable for failure to comply with operational standards as required and specified under Franchise Agreement, plus inspection and re-inspection costs incurred by us. |
| Payment Non-Compliance | $150 per occurrence | 14 days of invoice | Payable for failure to timely pay, when due, a fee or payment due to us under the Franchise Agreement, plus interest, costs and legal fees. |
| Audit | Cost of audit | On demand | For costs incurred by us for each financial audit, provided the audit determines underreporting of 2% or greater during any designated audit period. Includes fees incurred by us including audit, legal, travel and reasonable accommodations. |
Source: Item 6 — OTHER FEES (FDD pages 13–17)
What This Means (2024 FDD)
According to Bang Cookies's 2024 Franchise Disclosure Document, a franchisee will be responsible for covering the expenses associated with a financial audit if the audit reveals that they have underreported their sales by 2% or more during the audited period. This charge covers all costs incurred by Bang Cookies, including audit fees, legal fees, travel expenses, and reasonable accommodations for the auditors. The payment for these audit-related costs is due upon demand from Bang Cookies.
This policy serves as a deterrent against underreporting sales, as franchisees risk incurring significant expenses if their reported figures are inaccurate. It also ensures that Bang Cookies can recoup the costs associated with investigating potential discrepancies in reported sales figures. The 2% threshold provides a reasonable buffer, suggesting that minor discrepancies may not trigger a full audit and cost recovery.
For a prospective Bang Cookies franchisee, this means maintaining accurate and transparent financial records is crucial. Implementing robust accounting practices and regularly reviewing sales data can help avoid unintentional errors and potential audit triggers. Understanding this policy and its implications is an important part of managing the financial responsibilities of owning a Bang Cookies franchise.