What happens if a Bombs Away franchisee understates Gross Sales by 3% or more for any month?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee shall also reimburse Bombs Away Franchising for all costs and expenses of the examination or audit if (i) Bombs Away Franchising conducted the audit because Franchisee failed to submit required reports or was otherwise not in compliance with the System, or (ii) the audit reveals that Franchisee understated Gross Sales by 3% or more for any month.
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, if an audit reveals that a franchisee has understated their Gross Sales by 3% or more for any month, the franchisee is responsible for reimbursing Bombs Away for all costs and expenses associated with the examination or audit.
This means that Bombs Away has the right to audit a franchisee's books and records related to the business at any reasonable time. This audit can take place at the franchisee's location or the franchisee may be required to deliver copies of their books, records, and supporting documentation to a location designated by Bombs Away.
For a prospective Bombs Away franchisee, this highlights the importance of maintaining accurate and transparent financial records. Underreporting sales, even unintentionally, can lead to significant financial penalties beyond simply correcting the underpayment of royalties and marketing fund contributions. Franchisees should ensure they have robust accounting practices in place to avoid such situations.