Is Carvel responsible for the expenses of inspections and audits?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
usiness; (v) interview your employees, customers, landlords, and suppliers; and (vi) audit, review and examine by any means, including electronically through the use of telecommunications devices or otherwise, at our expense, your books, records, accounts, and tax returns related to the Franchised Business. We may require you to send us copies of your books, records, and files related to the Franchised Business, which you must provide to us or our representatives within a reasonable time (not to exceed 10 days) of our request. We also may require you to participate in customer satisfaction surveys or other audit programs, including electronically through the use of telecommunications devices or otherwise, to assess your compliance with our customer service standards. You will provide us with full cooperation in the course of any inspection or audit we conduct under this Section. Any inspections will be made at our expense, unless the inspection is necessitated by your repeated or continuing failure to comply with any provision of this Agreement, in which case we may charge you non-compliance fees and the costs and expenses we incur related to such inspections, including the wages and cost of travel and living expenses for our representatives.
- 14.2 Discrepancies. If any such inspection, audit, review, or examination reveals that Net Sales have been understated in any report to us, you must immediately pay to us the Royalty Fees and Advertising Contributions due with respect to the amount understated on demand, in addition to interest provided for under this Agreement. If any understatement exceeds 2% of Net Sales as stated in the report, you must, in addition, on demand, reimburse us for all reasonable expenses connected with the audit, review, or examination (including reasonable accounting and attorneys' fees).
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, Carvel typically bears the expenses for inspections and audits. However, if an inspection is required due to a franchisee's repeated or ongoing failure to comply with the Franchise Agreement, Carvel may charge the franchisee non-compliance fees, as well as the costs and expenses Carvel incurs for the inspection. This includes wages, travel, and living expenses for Carvel's representatives.
Furthermore, if an inspection, audit, review, or examination reveals that a franchisee has understated their Net Sales in any report to Carvel, the franchisee must immediately pay the Royalty Fees and Advertising Contributions due on the understated amount, along with interest. If the understatement exceeds 2% of Net Sales as stated in the report, the franchisee must also reimburse Carvel for all reasonable expenses connected with the audit, review, or examination, including reasonable accounting and attorneys' fees.
Additionally, if a franchisee violates the suspension of operations terms and has committed a similar violation within one year prior to the inspection or analysis, fails to comply with required remedial measures, fails to cooperate with an inspection or analysis, or repeats a violation of the suspension of operations terms, the franchisee will pay Carvel a $5,000 fee for the inspection or analysis. The franchisee will also be responsible for the travel and living expenses of Carvel's inspectors or representatives, as well as any other expenses, including attorney's fees, that Carvel incurs.