What recourse does Camp Margaritaville have if an audit reveals an underpayment by the franchisee?
Camp_Margaritaville Franchise · 2025 FDDAnswer from 2025 FDD Document
Section 7.03 Underpayments. In the event that an audit reveals an underpayment by Franchisee of fees owed to Franchisor, Franchisee shall, within 7 calendar days after Franchisor's notice of such underpayment: (a) reimburse Franchisor for the cost of the audit, if the underpayment is equal to or greater than 5% of the amount due; and (b) remit payment to Franchisor in the amount of the underpayment plus interest at the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank as its prime rate in effect at its principal office in New York City in connection with extensions of credit in U.S. funds to its U.S. customers, plus 2% per annum, calculated from the date such payment(s) were actually due.
Source: Item 23 — RECEIPTS (FDD pages 72–406)
What This Means (2025 FDD)
According to Camp Margaritaville's 2025 Franchise Disclosure Document, if an audit reveals that a franchisee has underpaid fees, the franchisee must take specific actions. Within 7 calendar days of receiving notice from Camp Margaritaville, the franchisee must remit payment to Camp Margaritaville for the amount of the underpayment. Additionally, the franchisee must pay interest on the underpayment. The interest rate is calculated as the prime rate publicly announced by JPMorgan Chase Bank in New York City, plus an additional 2% per annum, calculated from the original date the payment was due.
Furthermore, if the underpayment is equal to or greater than 5% of the total amount that was due, the franchisee is also responsible for reimbursing Camp Margaritaville for the cost of the audit itself. This provision ensures that Camp Margaritaville is compensated for the expenses incurred in identifying and rectifying significant underpayments.
In addition to these financial repercussions, Camp Margaritaville has further recourse in the event of an underpayment. Camp Margaritaville can take actions such as terminating the agreement, suspending access to the CRS, suspending access to advertising or marketing materials, removing the franchisee from the Resort System Website, suspending or terminating fee reductions, requiring additional Quality Assurance Audits, requiring audited financial statements, requiring additional training for personnel, refusing operational support, or assessing a fine of up to $500 per day for each day the issue remains unresolved after 30 days of written notice.