To whom are the audit expenses paid for a Burros Fries franchise?

According to the 2024 Burros Fries Franchise Disclosure Document, audit expenses are payable to the franchisor, Burros Fries, but only if the franchisee understates gross revenues by 2% or more. The FDD states that the cost of these audit fees, plus interest, is due ten days after the franchisee receives the audit report. The interest is calculated at 18% per annum (1.5% per month) up to the maximum interest rate allowed by law.

The FDD indicates that Burros Fries estimates the cost of the audit to be between $3,500 and $6,500. However, this cost may increase if the franchisee's financial records are not well-kept. This implies that maintaining accurate and organized financial records is crucial for a Burros Fries franchisee to avoid potentially higher audit expenses.

This fee structure incentivizes franchisees to accurately report their gross revenues. By implementing this policy, Burros Fries aims to ensure transparency and accuracy in financial reporting across all franchise locations. Prospective franchisees should be aware of this policy and maintain meticulous records to avoid triggering an audit and incurring these expenses.