Under what condition is the audit fee charged to a Carbones Pizzeria franchisee?
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, an audit fee may be charged to franchisees under specific conditions. The audit fee, which covers the cost of the audit plus a 1.5% interest per month on any underpayment from the date it was initially due, becomes payable only if an audit reveals that the franchisee has understated their Gross Sales by at least 2% for any given month. This fee is intended to compensate Carbones Pizzeria for the expense and effort of conducting an audit when discrepancies in reported sales figures are significant.
This policy serves as an incentive for franchisees to accurately report their sales figures. Underreporting sales not only affects the royalty payments due to Carbones Pizzeria but also distorts the overall financial picture of the franchise system. By imposing an audit fee in cases of significant underreporting, Carbones Pizzeria aims to ensure transparency and fairness across all franchise locations. The 1.5% monthly interest charge on underpayments further discourages franchisees from delaying the correction of any sales discrepancies.
For a prospective Carbones Pizzeria franchisee, it is crucial to maintain accurate and detailed sales records. Regularly reviewing sales data and comparing it against inventory and other financial metrics can help prevent unintentional errors. Understanding the conditions under which an audit fee may be imposed allows franchisees to proactively address any potential issues and maintain compliance with Carbones Pizzeria's reporting requirements. This promotes a healthy financial relationship between the franchisee and franchisor.