Under what condition does Casiola charge a franchisee for an audit?
Casiola Franchise · 2024 FDDAnswer from 2024 FDD Document
| Reporting Non-Compliance | $150 per occurrence | 14 days of invoice | Payable for failure to timely submit Royalty and Activity Reports, and other reports and financial statements as required under Franchise Agreement. |
| Operations Non-Compliance | $500 to $1,000 per occurrence | 14 days of invoice | Payable for failure to comply with operational standards as required under Franchise Agreement, plus inspection and re-inspection costs incurred by us. |
| Payment Non-Compliance | $150 per occurrence | 14 days of invoice | Payable for failure to timely pay, when due, a fee or payment due to us under the Franchise Agreement, plus interest, costs and legal fees. |
| Interest | 18% per annum from due date | On demand | Payable on all overdue amounts, fees, charges, and payments due to us under the Franchise Agreement. Interest rate cannot exceed legal rate allowed by law and may be adjusted to reflect same. |
| NSF Check Fee or Failed Electronic Fund Transfer | 5% of amount or $50, whichever is greater, or maximum fee allowed by law | On demand | Payable if your bank account possesses insufficient funds and/or fails to process a payment or transfer related to a fee due from you to us. |
| Audit | Cost of audit plus expenses | On demand | For costs incurred by us for each financial audit, provided the audit determines underreporting of 2% or greater during any designated period. Includes expenses incurred by us including audit, legal, travel and reasonable accommodations. |
Source: Item 6 — OTHER FEES (FDD pages 12–18)
What This Means (2024 FDD)
According to Casiola's 2024 Franchise Disclosure Document, Casiola may charge a franchisee for the cost of a financial audit, including audit, legal, travel, and accommodation expenses, if the audit determines that the franchisee has underreported by 2% or greater during any designated period. This cost is due on demand.
This means that Casiola franchisees must maintain accurate financial records and report their revenues correctly. If Casiola suspects underreporting, they can conduct an audit at the franchisee's expense if the underreporting is confirmed to be 2% or more.
This policy incentivizes franchisees to be transparent and accurate in their financial reporting. Franchisees should ensure they have proper accounting systems in place to avoid potential audit costs. It is a fairly standard practice in franchising to reserve the right to audit franchisees, particularly when there is a suspicion of underreporting, as the royalty payments are based on reported revenues.