What is a Craters & Freighters franchisee required to do during an audit or inspection?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
12. AUDITS AND INSPECTIONS.
- 12.1 Access to Business Records.
Franchisor, any Affiliate of Franchisor, or any designee of Franchisee has the right, at any time during reasonable business hours and without prior notice to Franchisee, to undertake or cause an audit or inspection of the Business Records, accounting records, sales and income tax records and returns, and other records of the Franchised Business and the books and records of any corporations or partnership which have any ownership interest in Franchisee.
Franchisee must fully cooperate with Franchisor, any Affiliate of Franchisor, and any designee of Franchisor who is carrying out any such audit or inspection.
- 12.2 Inspections at Premises.
To determine whether Franchisee and the Franchised Business are complying with this Agreement and, more specifically, all System Standards, Franchisor, any Affiliate of Franchisor, or any designee of Franchisee has the right at any reasonable time, and without prior notice to Franchisee, to: (1) inspect and photograph the Premises, and (2) interview personnel and customers of the Franchised Business.
Franchisee agrees to cooperate fully with Franchisor in connection with any such inspections and interviews, including but not limited to using any evaluation forms and surveys prescribed by Franchisor.
- 12.3 Understatement of Adjusted Gross Sales.
In the event any audit or inspection discloses an understatement of the Franchised Business's Adjusted Gross Sales, Franchisee must pay to Franchisor, within fifteen (15) days after receipt of the audit or inspection report, the Royalty Fee and Marketing Fund Contributions due on the amount of such understatement, plus interest at the rate of prime plus five percent (5%) as per the records of any mega national bank from the date originally due until the day of payment.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to Craters & Freighters' 2025 Franchise Disclosure Document, franchisees are required to fully cooperate with the franchisor, its affiliates, or designees during any audit or inspection. This cooperation extends to providing access to business records, accounting records, sales and income tax records and returns, and other records of the franchised business, including those of any corporations or partnerships with ownership interest in the franchisee. These audits and inspections can occur at any time during reasonable business hours and without prior notice.
In addition to providing access to records, Craters & Freighters franchisees must also allow inspections of the premises and interviews with personnel and customers. Franchisees are expected to cooperate fully with these inspections and interviews, including using any evaluation forms and surveys prescribed by the franchisor. This allows Craters & Freighters to assess compliance with the franchise agreement and system standards.
If an audit or inspection reveals an understatement of the franchised business's Adjusted Gross Sales, the franchisee is obligated to pay the Royalty Fee and Marketing Fund Contributions due on the understated amount. This payment must be made within fifteen days of receiving the audit or inspection report, along with interest calculated at a rate of prime plus five percent from the original due date until the payment date. This ensures that Craters & Freighters receives the correct royalties and marketing contributions based on actual sales figures.