Under what condition can a Cinnaholic franchisee provide internally prepared financial statements instead of those compiled or reviewed by an independent CPA?

According to Cinnaholic's 2025 Franchise Disclosure Document, franchisees are generally required to submit annual financial statements that have been compiled or reviewed by an independent certified public accountant. These statements must be in a format that Cinnaholic finds satisfactory and should include a statement of income and retained earnings, a statement of cash flows, and a balance sheet for the fiscal year. This requirement ensures that Cinnaholic receives reliable and standardized financial information from all its franchise locations.

However, Cinnaholic allows an exception to this rule. If a franchisee does not typically obtain financial statements compiled or reviewed by an independent CPA in their ordinary course of business, they may submit internally prepared financial statements instead. These internally prepared statements must be certified as true and correct by the franchisee themselves, or by the franchisee's principal executive officer or chief financial officer if the franchisee is a partnership, corporation, or limited liability company. This provides some flexibility for franchisees who may not have the resources or need for independently reviewed financials.

It's important to note that Cinnaholic retains the right to demand audited annual statements from the franchisee at any time, and the franchisee would be responsible for covering the expense of such an audit. This clause gives Cinnaholic the ability to request a higher level of financial scrutiny if they deem it necessary. Franchisees should be aware of this potential cost and factor it into their financial planning. This flexibility in reporting requirements, coupled with the potential for mandatory audits, is a fairly common practice in franchising, balancing the franchisor's need for accurate financial data with the franchisees' operational realities.