What are the Craters & Freighters franchisee's obligations regarding access for inspections and audits?
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 the 2025 Craters & Freighters Franchise Disclosure Document, Craters & Freighters, its affiliates, or its designees have the right to audit or inspect the franchisee's business records, accounting records, sales and income tax records, and other records at any time during reasonable business hours and without prior notice. This extends to the books and records of any corporations or partnerships that have an ownership interest in the franchisee. The franchisee must fully cooperate with Craters & Freighters during these audits or inspections.
Craters & Freighters, its affiliates, or its designees also have the right to inspect and photograph the premises and interview personnel and customers of the franchised business at any reasonable time and without prior notice to ensure compliance with the franchise agreement and system standards. The franchisee must cooperate fully with these inspections and interviews, including using any evaluation forms and surveys prescribed by Craters & Freighters.
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 the date of payment. This payment must be made within fifteen (15) days after receiving the audit or inspection report. This clause incentivizes accurate reporting and provides a mechanism for Craters & Freighters to recoup lost revenue and maintain the integrity of the financial reporting system across all franchises.