Under what condition are audit expenses payable to Burros Fries?
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, audit expenses are payable to Burros Fries only if a franchisee understates gross revenues by 2% or more. The cost of these audit fees, plus interest, is the responsibility of the franchisee if the understatement threshold is met. The interest is calculated at 18% per annum (1.5% per month) up to the maximum interest rate allowed by law. Payment is due ten days after receipt of the audit report.
The FDD indicates that the expected cost for audit fees will likely range from $3,500 to $6,500. However, this estimate can increase if the franchisee's financial records are not well-maintained. This implies that franchisees should prioritize accurate and organized record-keeping to avoid potential audit expenses.
This condition incentivizes franchisees to report their gross revenues accurately. Underreporting revenues not only triggers an audit but also results in the franchisee bearing the cost of the audit itself, along with potential interest charges. This policy is in place to ensure transparency and compliance within the Burros Fries franchise system.