What is the deadline for paying Cream the amounts due on understated Net Sales discovered during an examination?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
If any examination discloses an understatement of the Net Sales, you agree to pay us, within 15 days after receiving the examination report, the amounts that would be due on such understated Net Sales under this Agreement, plus our service charges and interest on the understated amounts from the date originally due until the date of payment. Furthermore, if an examination is necessary due to your failure to furnish reports, supporting records, or other information as required, or to furnish these items on a timely basis, or if our examination reveals an understatement exceeding 2% of the amount that you actually reported to us for the period examined, you agree to reimburse us for our costs of the examination, including the audit cost, charges of attorneys and independent accountants, and the travel expenses, room and board, and compensation of our employees. These remedies are in addition to our other remedies and rights under this Agreement and applicable law.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, if an examination of a franchisee's records reveals an understatement of Net Sales, the franchisee must pay Cream the amounts due on the understated Net Sales within 15 days after receiving the examination report. This payment includes not only the amounts due on the understated Net Sales but also Cream's service charges and interest on the understated amounts, calculated from the original due date until the date of payment.
This policy ensures that Cream receives the correct royalties and fees based on accurate sales figures. It also incentivizes franchisees to maintain accurate records and report sales correctly. The inclusion of service charges and interest acts as a penalty for underreporting, compensating Cream for the time value of money and the administrative costs associated with the audit.
Furthermore, if the audit was necessary due to the franchisee's failure to provide required reports or if the understatement exceeds 2% of the reported amount, the franchisee is also responsible for reimbursing Cream for the costs of the examination. These costs can include audit expenses, attorney and accountant fees, and travel expenses for Cream's employees. This provision serves as a further deterrent against inaccurate reporting and non-compliance with reporting requirements.
In summary, Cream franchisees must be diligent in their sales reporting to avoid penalties and audit costs. The 15-day payment deadline for understated Net Sales, along with potential reimbursement of audit costs, underscores the importance of accurate record-keeping and timely reporting in the Cream franchise system.