Under what conditions is a Chop5 Salad Kitchen franchisee charged an audit fee?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
| Type of Fee 1 | AMOUNT 2, 3 | DUE DATE | REMARKS |
|---|---|---|---|
| System Program | Varies (not currently charged) | 10 days after invoice or as otherwise specified | You must participate in any customer loyalty and/or gift card program we establish and pay all associated program contributions and fees we require to implement and administer these programs. These amounts are paid either to us or to a third party we designate. |
| Fees | |||
| Product Purchases | Varies depending on item purchased | 10 days after invoice | We or our affiliate may serve as a System supplier for certain goods or services you must purchase. If this occurs, we will provide you with a price list upon request. |
| New Product or | Cost of testing (up to $2,500 per test) | 10 days after invoice | This covers the costs of testing new products or inspecting new suppliers you propose. |
| Supplier Testing | |||
| Relocation Fee | $5,000 | At time we approve request to relocate | Imposed if we approve your request to relocate your Restaurant. |
| Renewal Fee | $2,000 | At time you sign Renewal Agreement | Imposed if you renew your franchise rights by signing a successor Franchise Agreement. |
| Transfer Fee | [Franchise Agreement] Greater of $4,000 or 10% of then-current standard\ninitial franchise fee [ADA] $15,000 | Before Transfer | You do not pay us a transfer fee for a Permitted Transfer or Minority Interest Transfer. All other Transfers require payment of the transfer fee. If you sign an ADA, a separate transfer fee is imposed under the ADA and each Franchise Agreement that is assigned. If our broker finds the buyer, you must also reimburse us for all commissions we pay the broker. |
| Reimbursement of | Varies | 10 days after invoice | We may hire a person or company to inspect your Restaurant for quality control purposes. You must pay the cost of the inspection (or we may pay the cost and you must reimburse us). |
| Quality Assurance | |||
| Program Costs | |||
| Reimbursement of | All Travel Expenses and other costs we incur to travel to and inspect your Restaurant | 10 days after invoice | Imposed if we inspect your Restaurant to determine if you remedied a (a) health or safety issue identified by a government agency or (b) breach of system standards that we previously brought to your attention. |
| Reinspection | |||
| Costs | |||
| Audit Fee | Actual cost of audit (including Travel Expenses for audit team) | 10 days after invoice | Imposed if an audit (a) is necessary because you fail to send us required information or reports in a timely manner on 3 or more occasions in any 12-month period or (b) reveals you understated Gross Sales by 3% or more. |
Source: Item 6 — OTHER FEES (FDD pages 12–17)
What This Means (2024 FDD)
According to Chop5 Salad Kitchen's 2024 Franchise Disclosure Document, an audit fee may be imposed on a franchisee under specific circumstances. The audit fee covers the actual cost of the audit, including travel expenses for the audit team. This fee is due 10 days after the invoice date.
Chop5 Salad Kitchen will charge this fee if an audit becomes necessary because the franchisee fails to submit required information or reports in a timely manner on three or more occasions within a 12-month period. This condition emphasizes the importance of consistent and timely reporting to the franchisor.
Additionally, Chop5 Salad Kitchen will levy the audit fee if an audit reveals that the franchisee has understated gross sales by 3% or more. This provision serves as a deterrent against inaccurate reporting of sales figures, which directly impacts royalty payments and the overall financial health of both the franchisee and the franchisor. Franchisees should ensure accurate record-keeping to avoid triggering an audit and the associated costs.