What is the interest rate Cool Binz charges on underreported royalties discovered during an audit?
Cool_Binz Franchise · 2025 FDDAnswer from 2025 FDD Document
If any inspection or audit discloses an understatement of Gross Sales, we can debit your account, as provided in Sections 2.C and 2.H of this Agreement, for the Royalty and Brand Marketing Fees which are due on the amount of the understatement, plus interest, at the rate of 18% per annum or the maximum rate permitted by applicable law, whichever is lesser, and all late fees, from the date originally due until the date of payment.
Source: Item 23 — RECEIPTS (FDD pages 63–238)
What This Means (2025 FDD)
According to Cool Binz's 2025 Franchise Disclosure Document, if an audit reveals that a franchisee has underreported gross sales, leading to an understatement of royalties, Cool Binz will charge interest on the underpaid amount. Specifically, Cool Binz will impose interest at a rate of 18% per annum, or the maximum rate permitted by applicable law, whichever is lesser. This interest accrues from the original due date of the royalties until the date the payment is made.
This means that if Cool Binz discovers during an audit that a franchisee owes additional royalties, the franchisee will not only have to pay the underpaid royalties but also interest on that amount. The interest rate is set at 18% annually, but if the law in the franchisee's jurisdiction sets a lower maximum interest rate, that lower rate will apply.
For a prospective Cool Binz franchisee, this highlights the importance of accurate and timely reporting of gross sales and royalty payments. Underreporting, even if unintentional, can lead to significant additional costs in the form of interest charges and potential penalties. Franchisees should ensure they have systems in place to accurately track and report all sales to avoid these charges.