Is the Chocolate Bash Marketing Fund financial statement audited?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
CB Franchising will prepare an unaudited annual financial statement of the Marketing Fund within 120 days of the close of CB Franchising's fiscal year and will provide the financial statement to Franchisee upon request.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to the 2024 FDD, Chocolate Bash will provide franchisees with an annual financial statement of the Marketing Fund. However, this financial statement is unaudited. This means that the financial information presented has not been independently verified by a certified public accountant.
For a prospective franchisee, this implies a degree of risk. While Chocolate Bash is obligated to provide a financial statement, the lack of an audit means there is no independent assurance that the statement is free from material misstatement. Franchisees must rely on the franchisor's internal controls and accounting practices, which may not be as rigorous as those subjected to an external audit.
In the franchise industry, it is not uncommon for marketing funds to be unaudited, especially for smaller or newer franchise systems. However, some larger and more established franchisors do provide audited financial statements for their marketing funds to enhance transparency and franchisee confidence. A prospective Chocolate Bash franchisee may want to inquire about the reasons for not conducting an audit and assess the potential risks associated with relying on unaudited financial information.