Under what condition can CJR require a Carls franchisee to submit audited financial statements prepared by a certified public accounting firm?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
At CJR's request, Franchisee shall, at its expense, provide to CJR either a reviewed or audited profit and loss statement and balance sheet for the Franchised Restaurant within 60 days after the end of each fiscal year to be signed by Franchisee or by Franchisee's treasurer or chief financial officer attesting that the financial statements present fairly the financial position of Franchisee and the results of operations of the Franchised Restaurant during the period covered. CJR shall have the right, in its reasonable discretion, to require that Franchisee, at Franchisee's expense, submit audited financial statements prepared by a certified public accounting firm acceptable to CJR for any fiscal year or any period or periods of a fiscal year.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, CJR has the right to request that a franchisee submit audited financial statements prepared by a certified public accounting firm. This request can be made for any fiscal year or any period within a fiscal year. The franchisee is responsible for covering the expense of these audited financial statements.
Carls also requires franchisees to submit periodic financial reports. Franchisees must provide monthly profit and loss statements and balance sheets (which can be unaudited) within 30 days of each month's end. Additionally, franchisees must submit quarterly profit and loss statements and balance sheets (also unaudited) within 30 days of each fiscal quarter's end. Carls retains the right to request these statements at other times as well.
Furthermore, Carls can request that franchisees provide either a reviewed or audited profit and loss statement and balance sheet for the Franchised Restaurant within 60 days after the end of each fiscal year. These financial statements must be signed by the franchisee or their treasurer or chief financial officer, attesting to their accuracy and adherence to consistent accounting principles. These stipulations ensure that Carls maintains oversight of the financial health and reporting practices of its franchisees.