What is the Baya Bar franchisee's obligation if an audit reveals an understatement of amounts owed?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
| (1) | (2) | (3) | (4) |
|---|---|---|---|
| Fees (1) | Amount | Due Date | Remarks |
| Pre-Opening Training (For New or Replacement Employees) | Our then-current per session training fee, plus expenses Current per session training fee = $3,000 | Before Training | We will train up to three people at no additional charge. If you request that we provide our pre-opening training program to any additional employees, or to new or replacement employees during the term of your Franchise Agreement, you must pay our training fee as well as the trainees' expenses, including travel, lodging, meals and wages. |
| Additional Onsite Training/Remedial Training | Our then-current per diem rate per trainer, plus expenses Current per diem rate = $600 | When billed | If you request that we provide additional training or support at your Shop, or if as the result of an inspection or quality assurance audit we believe that remedial training is necessary, you must pay our daily fee for each trainer we send to your Shop, and you must reimburse each trainer's expenses, including travel, lodging and meals. |
| Interest | 18% per annum or the highest interest rate allowed by applicable law, whichever is less | On demand | Interest may be charged on all overdue amounts. Interest accrues from the original due date until payment is received in full. * See below |
| Audit Fee | Cost of audit (estimated to be between $1,000 and $5,000) | When billed | Payable only if we find, after an audit, that you have understated Gross Sales by 2% or more or you have understated any amount you owe to us. You must also pay the u |
Source: Item 6 — OTHER FEES (FDD pages 11–16)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, if an audit reveals that a franchisee has understated gross sales by 2% or more, or has understated any amount owed to Baya Bar, the franchisee is responsible for covering several costs. Specifically, the franchisee must pay for the cost of the audit itself, which is estimated to be between $1,000 and $5,000.
In addition to covering the audit fees, the franchisee is also obligated to pay the understated amount that was initially not reported. This ensures that Baya Bar receives the correct amount of royalties and other fees that are due under the franchise agreement.
Furthermore, the franchisee must pay interest on the understated amount. This interest accrues from the original due date of the payment until the date the payment is finally received by Baya Bar. This provision serves as a financial disincentive for underreporting sales or other amounts owed, as it makes it more costly for franchisees to delay or avoid making accurate payments.