Does Cool Binz have the right to inspect and audit financial records?
Cool_Binz Franchise · 2025 FDDAnswer from 2025 FDD Document
We have the right at any time during business hours, and without prior notice to you, to inspect and audit, or cause to be inspected and audited, any and all financial statements, reports, income tax records, sales tax records, payroll records, software databases, and other records. You must cooperate fully with our representatives and independent accountants we hire to conduct any inspection or audit.
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, Cool Binz has the right to inspect and audit a franchisee's financial records. Cool Binz can perform these inspections and audits at any time during business hours and without prior notice. They can inspect and audit financial statements, reports, income tax records, sales tax records, payroll records, software databases, and other records. The franchisee must cooperate fully with Cool Binz's representatives and independent accountants during these inspections or audits.
Cool Binz requires franchisees to use designated accounting software, currently QuickBooks Online, and follow a specified Chart of Accounts, which Cool Binz can change at their discretion. Cool Binz will have automatic password access to the franchisee's financial reports on this system. Franchisees must maintain all records, reports, and financial statements for five years during and after the termination, transfer, or expiration of the Franchise Agreement.
If an inspection or audit reveals an understatement of Gross Sales, Cool Binz can debit the franchisee's account for the Royalty and Brand Marketing Fees due on the understated amount, plus interest at 18% per annum (or the maximum rate permitted by law) and all late fees. If Cool Binz conducts an inspection or audit due to the franchisee's failure to furnish reports or information as required, failure to record customer payments in the Cool Binz Software within 48 hours, or failure to use the Cool Binz/Required Software for scheduling or invoicing, or if the understatement of Royalty is greater than 3% for any period reviewed, the franchisee must reimburse Cool Binz for the cost of the inspection and/or audit, including attorney and accountant fees, travel expenses, and employee compensation. Furthermore, if the understatement of Royalty is greater than 3%, the franchisee must also pay a penalty fee equal to 10% of the total amount of the understated Gross Sales.
Cool Binz also requires franchisees to use the Cool Binz Software or other Required Software for maintaining customer records. Cool Binz has confidential access to the franchisee's databases and related information from the Cool Binz Software, which they use to compute the Royalty due on Gross Sales and to make other evaluations and verifications. Franchisees must furnish income statements, profit and loss statements, and cash flow statements within 48 hours of request, a report of Gross Sales each month, unaudited income statements within 10 days of request, and complete income statements and other financial statements within 90 days after the close of the fiscal year. Franchisees must also provide copies of state, federal, or other income tax returns within ten days of request and financial projections and a marketing plan by November 1 of each year.