What is the interest rate charged on underpayments discovered during an audit for Carbones Pizzeria?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
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| (Column 1) Type of Fee1 | (Column 2) Amount | (Column 3) Due Date | (Column 4) Remarks |
|---|---|---|---|
| Transfer | $5,000 | Prior to consummation of transfer | Payable when you sell your franchise or your business entity or a majority interest in said entity. No charge if franchise transferred to a corporation which you solely own. |
| Audit | Cost of audit plus 1.5% interest per month on underpayment from date initially due. | Upon billing | Payable only if audit shows an understatement of at least 2% of Gross Sales for any month. |
| Renewal | $1,500 | You must sign our then-current form of franchise agreement which may contain different terms and conditions than those in your Franchise Agreement, including diffe |
Source: Item 6 — OTHER FEES (FDD pages 8–10)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, if an audit reveals an understatement of at least 2% of Gross Sales for any month, Carbones Pizzeria will charge interest on the underpayment. The interest rate is 1.5% per month from the date the payment was initially due.
This means that if Carbones Pizzeria discovers a significant discrepancy in reported sales during an audit, franchisees will not only be responsible for covering the underpaid amount but also for paying a monthly interest charge of 1.5% on that amount. This interest accrues from the original due date of the underpayment, potentially leading to a substantial additional cost over time.
Franchisees should maintain meticulous and accurate records of their gross sales to avoid such understatements. It is also important to understand the definition of Gross Sales as defined in the franchise agreement, to ensure accurate reporting. The audit fee and interest on underpayments are separate from the late fee of 1.5% per month, which is applied to any amounts owed to Carbones Pizzeria that are not paid on time.