What are the two reasons Chocolate Bash may audit a franchisee?
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 |
Source: Item 6 — OTHER FEES (FDD pages 9–13)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, there are two specific reasons why Chocolate Bash may audit a franchisee. These audits are not arbitrary but are triggered by specific franchisee actions or potential discrepancies.
The first reason Chocolate Bash may audit a franchisee is if the franchisee fails to submit required reports or demonstrates other forms of non-compliance with the franchise agreement. This suggests that Chocolate Bash places a strong emphasis on franchisees adhering to reporting requirements, and failure to do so can lead to further scrutiny.
The second reason Chocolate Bash may conduct an audit is if there is suspicion that the franchisee has under-reported gross sales. This is a critical aspect, as royalty fees are typically calculated as a percentage of gross sales. Under-reporting sales would directly impact the royalties owed to Chocolate Bash, making it a significant concern for the franchisor. If an audit is triggered for either of these reasons, the franchisee may be responsible for covering the costs associated with the audit.