What is the franchisee's obligation regarding cooperation with Craters & Freighters during an audit or inspection?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, a franchisee must fully cooperate with Craters & Freighters, its affiliates, and its 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 related to the franchised business, including those of any corporations or partnerships with ownership interest in the franchisee.
Specifically, Craters & Freighters, its affiliates, or its designees have the right to audit or inspect these records at any time during reasonable business hours without prior notice. Franchisees are also expected to cooperate fully with inspections of the premises, including allowing photographs to be taken, and with interviews of personnel and customers. The franchisee must use any evaluation forms and surveys prescribed by Craters & Freighters during these inspections and interviews.
If an audit or inspection reveals an understatement of the franchised business's Adjusted Gross Sales, the franchisee is obligated to pay Craters & Freighters the Royalty Fee and Marketing Fund Contributions due on the understated amount, along with interest at a rate of prime plus five percent (5%) from the original due date until payment. Furthermore, the franchisee may be required to reimburse Craters & Freighters for the costs of the audit or inspection under certain conditions.
These conditions include failure or refusal to furnish required reports, records, or information; failure to provide records on a timely basis; failure to have books and records available after receiving advance notice; failure to cooperate with the audit or inspection; or if the understatement of Adjusted Gross Sales exceeds five percent (5%). These obligations are in addition to any other remedies Craters & Freighters may have under the Franchise Agreement or applicable law. Compliance with these audit and inspection procedures is essential for maintaining a Craters & Freighters franchise.