What determines if a Cordova franchisee is subject to an audit fee?
Cordova Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee (Note 1) | Amount | Due Date | |
|---|---|---|---|
| Audit | Cost of audit | On demand | For costs incurred by us for each financial audit, provided the audit determines underreporting of 2% or greater during any designated period. Includes expenses incurred by us including audit, legal, travel and reasonable accommodations. |
Source: Item 6 — OTHER FEES (FDD pages 11–15)
What This Means (2025 FDD)
According to Cordova's 2025 Franchise Disclosure Document, a franchisee will be subject to an audit fee if a financial audit determines underreporting of 2% or greater during any designated period. This audit fee covers the costs incurred by Cordova for the audit, including expenses for the audit itself, legal fees, travel, and reasonable accommodations. The audit fee is payable on demand.
This means that if Cordova suspects a franchisee of underreporting their gross sales or other financial information by 2% or more, they can conduct an audit at the franchisee's expense. The costs can potentially be substantial, as they include not only the direct costs of the audit but also legal and travel-related expenses.
Franchisees should maintain accurate and transparent financial records to avoid triggering such an audit. It is also important to understand what Cordova considers 'underreporting' and what designated periods are subject to review. Prospective franchisees should clarify these points with Cordova during their due diligence to fully understand the potential financial risks associated with audit fees.