If a Chocolate Bash franchisee is not in compliance with the System, is an audit fee triggered?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
to the vendor. If CB Franchising does so, it may impose a reasonable markup or charge for administering the payment program.
- 4.8 Non-Compliance Fee. CB Franchising may charge Franchisee $500 for any instance of non-compliance with the System Standards or this Agreement (other than Franchisee's nonpayment of a fee owed to CB Franchising) which Franchisee fails to cure after 30 days' notice. Thereafter, CB Franchising may charge Franchisee $250 per week until Franchisee ceases such non-compliance. This fee is a reasonable estimate of CB Franchising's internal cost of personnel time attributable to addressing the non-compliance, and it is not a penalty or estimate of all damages arising from Franchisee's breach. The non-compliance
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, a franchisee may be charged a non-compliance fee for failing to adhere to System Standards or the Franchise Agreement. This fee is distinct from an audit fee.
Specifically, Chocolate Bash may impose a $500 charge for each instance of non-compliance, provided the franchisee fails to correct the issue within 30 days of receiving notice. If the non-compliance continues beyond this initial period, Chocolate Bash can then charge $250 per week until the franchisee rectifies the situation.
The FDD clarifies that these fees are designed to cover Chocolate Bash's internal costs related to addressing the non-compliance and are not considered a penalty or a comprehensive estimate of all potential damages resulting from the franchisee's breach. Furthermore, these non-compliance fees are in addition to any other legal rights and remedies Chocolate Bash may pursue, including default and termination of the franchise agreement.