Under what financial condition is the audit fee payable for a Carbones Pizzeria franchise?
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 is payable under specific financial conditions. The audit fee, along with 1.5% interest per month on any underpayment from the date it was initially due, becomes payable upon billing. However, this fee is only charged if an audit reveals that the franchisee has understated their Gross Sales by at least 2% for any given month.
This condition means that a Carbones Pizzeria franchisee will not be subject to an audit fee unless a formal audit determines that they have significantly underreported their sales figures. The 2% threshold provides a buffer, suggesting that minor discrepancies may not trigger an audit fee. However, consistently and accurately reporting Gross Sales is crucial to avoid the risk of an audit and the associated fees and interest on any underpayment.
Franchisors often reserve the right to audit franchisees to ensure accurate reporting of sales, which directly impacts royalty payments. The specific threshold of 2% for triggering an audit fee provides clarity for Carbones Pizzeria franchisees. It is important to note that the interest charged on underpayments is a significant penalty, highlighting the importance of accurate and timely sales reporting.