Under what condition is a Casiola franchisee subject to an audit fee?
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, a franchisee may be subject to an audit fee if a financial audit determines underreporting of 2% or greater during any designated period. This audit fee covers the costs incurred by Casiola for the audit, including expenses for the audit itself, legal fees, travel, and reasonable accommodations. The audit fee is payable to Casiola on demand.
This means that if Casiola suspects a franchisee is not accurately reporting their financial information and conducts an audit that confirms underreporting of 2% or more, the franchisee will be responsible for covering all associated audit expenses. This provision incentivizes franchisees to maintain accurate and transparent financial records.
Franchisors commonly reserve the right to audit franchisees to ensure compliance with financial reporting requirements and to protect the integrity of the franchise system. The specific threshold for triggering an audit fee, such as the 2% underreporting threshold used by Casiola, can vary among franchise systems. Prospective franchisees should carefully review the audit provisions in the Franchise Agreement to understand their obligations and potential financial exposure.