If a Chocolate Bash franchisee under-reports gross sales, what action might Chocolate Bash take?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Our actual costs | Payable only if (1) we audit you because | ||
| you have failed to submit required reports | |||
| or other non-compliance, or (2) the audit | |||
| concludes that you under-reported gross | |||
| sales b | |||
| Royalty | 6% of your gross sales | Monthly by the 5th day of the following month | See Note 1 and Note 2. |
| Marketing Fund Contribution | 1% of your gross sales | Monthly by the 5th day of the following month |
Notes
- "Gross Sales" is defined in our franchise agreement as the total dollar amount of all sales generated through your business for a given period, including, but not limited to, payment for any services or products sold by you, whether for cash or credit. Gross Sales does not include (i) bona fide refunds to customers, (ii) sales taxes collected, (iii) sale of used equipment not in the ordinary course of business, or (iv) sales of prepaid cards or similar products (but the redemption of any such card or product will be included in Gross Sales).
Source: Item 6 — OTHER FEES (FDD pages 9–13)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, if an audit concludes that a franchisee has under-reported gross sales, the franchisee may be required to cover the costs associated with the audit. This measure is in place to ensure accurate reporting and payment of royalties and marketing contributions, which are calculated as percentages of gross sales.
Specifically, Chocolate Bash calculates royalty fees as 6% of gross sales and marketing fund contributions as 1% of gross sales. Gross sales include all sales generated through the business, whether for cash or credit, but exclude bona fide refunds to customers, sales taxes collected, sale of used equipment not in the ordinary course of business, and sales of prepaid cards (though redemption of such cards is included). Accurate reporting is crucial, as these percentages directly impact the franchisee's financial obligations to Chocolate Bash.
This policy incentivizes franchisees to maintain transparent and accurate financial records. The potential for an audit, coupled with the responsibility for covering audit costs in the event of under-reporting, serves as a deterrent against inaccurate reporting. Prospective franchisees should understand the importance of meticulous record-keeping and accurate sales reporting to avoid these additional expenses and maintain a positive relationship with Chocolate Bash.