Is Camp Margaritaville responsible for covering any costs the customer incurs while cooperating with an audit?
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.
ARTICLE VIII. INTELLECTUAL PROPERTY
Source: Item 23 — RECEIPTS (FDD pages 72–406)
What This Means (2025 FDD)
According to the 2025 Camp Margaritaville FDD, the franchisee is generally responsible for costs associated with audits. Specifically, if an audit reveals an underpayment of fees owed to Camp Margaritaville, and that underpayment is equal to or greater than 5% of the amount due, the franchisee must reimburse Camp Margaritaville for the cost of the audit. The franchisee must also remit payment for the amount of the underpayment, plus interest.
In terms of Quality Assurance Audits, the franchisee is responsible for the costs of lodging, food and beverage, and other related living expenses for inspectors during these audits. However, Quality Assurance Audits conducted in the ordinary course of business are free of charge, unless the Resort fails the audit. In that case, the franchisee will be charged a $5,000 fee for each additional Quality Assurance Audit until the Resort becomes compliant. This fee is subject to change at Camp Margaritaville's discretion.
These stipulations mean that a Camp Margaritaville franchisee could face significant expenses if they fail to comply with financial or quality standards. It is crucial for franchisees to maintain accurate records and adhere to system standards to avoid triggering these audit-related costs. The potential for these expenses should be factored into the franchisee's financial planning and operational strategy.