If the Carbones Pizzeria franchisee fails to prepare financial statements, who pays for the audit?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall furnish Franchisor by the 5th of each month a full and complete sales report for the previous month.
The report shall be in such form and shall require such information from Franchisee as Franchisor may require from time-to-time.
In addition, Franchisee shall furnish Franchisor with a financial statement for each quarter and annually in such form as Franchisor shall require and shall further provide such other and additional financial statements as Franchisor may determine from time to time.
All operating records shall be maintained and provided in accordance with Franchisor's requirements.
Franchisor shall have independent direct access to all data in the POS System.
Franchisor may access this data at any time and Franchisee will assist to facilitate this access.
Source: Item 23 — RECEIPTS (FDD pages 30–116)
What This Means (2025 FDD)
Based on the 2025 Carbones Pizzeria Franchise Disclosure Document, the agreement outlines the franchisee's responsibilities for providing financial information to the franchisor. Specifically, the franchisee must furnish monthly sales reports, as well as quarterly and annual financial statements in a form required by Carbones Pizzeria. The agreement also states that all operating records should be maintained and provided according to Carbones Pizzeria's requirements. Carbones Pizzeria has independent direct access to all data in the POS system and may access this data at any time, with the franchisee's assistance.
However, the FDD excerpt does not explicitly state who bears the cost of an audit if the franchisee fails to prepare the required financial statements. While Carbones Pizzeria retains the right to access the franchisee's accounting and financial systems to determine gross sales and fees due, the document does not specify whether the franchisee would be responsible for covering audit expenses incurred by Carbones Pizzeria in the event of non-compliance with financial reporting obligations.
A prospective Carbones Pizzeria franchisee should clarify with the franchisor the specific financial consequences of failing to provide timely and accurate financial statements, including who would be responsible for covering the costs of any necessary audits or financial reviews. Understanding these potential costs is crucial for assessing the overall financial obligations and risks associated with the franchise.