What factors determine the amount of Audit Expenses that a Cinnaholic franchisee might incur?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
Note 4: You must pay our audit expenses only if an audit of your records reveals an understatement of 5% or more of your total amount owed to us during the audit period. In addition to any unpaid amounts you may owe us, you must reimburse us for the actual costs we incur in conducting the audit, including travel, lodging, meals, and compensation of the auditing personnel that may travel to your Bakery. The cost of the audit will depend on many factors that will vary on a case-by-case basis, like the condition and accuracy of your recordkeeping, the extent of your cooperation, the number of years of your accounting records that are reviewed during the audit process, and other circumstances unique to your particular audit. As a result, we are unable to estimate a range of these audit costs; however, these audit expenses will not exceed our actual costs.
Source: Item 6 — OTHER FEES (FDD pages 13–17)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the amount of audit expenses a franchisee may incur depends on several factors. Cinnaholic will only charge audit expenses if an audit of the franchisee's records reveals an understatement of 5% or more of the total amount owed to Cinnaholic during the audit period.
The expenses cover the actual costs Cinnaholic incurs while conducting the audit. These costs include travel, lodging, meals, and compensation for the auditing personnel who may travel to the franchisee's bakery. The exact cost of the audit is determined on a case-by-case basis, considering factors such as the condition and accuracy of the franchisee's recordkeeping, the extent of their cooperation during the audit, the number of years of accounting records reviewed, and any other unique circumstances specific to that particular audit.
Because of the variability of these factors, Cinnaholic is unable to provide an estimated range for audit costs. However, the FDD states that these audit expenses will not exceed Cinnaholic's actual costs. This means a Cinnaholic franchisee's audit expenses can vary significantly depending on their record-keeping practices and cooperation during an audit, but the expenses will be directly tied to the actual costs incurred by Cinnaholic.