What is the maximum interest rate charged on audit expenses for a Burros Fries franchise?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
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| Audit Expenses | Cost of Audit Fees plus interest at 18% per annum (1.5% per month) up to the maximum interest rate allowed by law. | Ten days after receipt of audit report. | Payable to us only if you understate Gross Revenues by 2% or more. We expect the cost to be between $3,500- $6,500 unless your financial records are not well kept.
Source: Item 6 — OTHER FEES (FDD pages 12–16)
What This Means (2024 FDD)
According to Burros Fries's 2024 Franchise Disclosure Document, if a franchisee understates gross revenues by 2% or more, Burros Fries may conduct an audit. The franchisee is responsible for the cost of audit fees plus interest. The interest is calculated at 18% per annum, which is equivalent to 1.5% per month. However, the interest rate will not exceed the maximum interest rate allowed by law.
The FDD states that Burros Fries estimates the cost of an audit to be between $3,500 and $6,500, assuming the franchisee maintains well-kept financial records. The audit expenses, including interest, are due within ten days after the franchisee receives the audit report.
It is important to note that Note 3 in Item 6 states that the interest rate cannot exceed 10% per year in California. This may mean that the maximum interest rate charged on audit expenses may vary depending on the state.