If Cream over-debits a franchisee based on understated Net Sales, what happens?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
We and/or our representatives may at any time during your business hours, without prior notice to you, examine the bookkeeping and accounting records for your Shop, sales and income tax records and returns, and other records. You agree to cooperate fully with our representatives in any examination. 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, Cream has the right to audit a franchisee's records. Cream and/or its representatives can examine the bookkeeping and accounting records for the Shop, sales and income tax records and returns, and other records at any time during business hours without prior notice. The franchisee must cooperate fully with Cream's representatives during any examination.
If an examination reveals an understatement of Net Sales, the franchisee must pay Cream the amounts that would be due on the understated Net Sales under the Franchise Agreement. This payment is due within 15 days after receiving the examination report, plus service charges and interest on the understated amounts from the date originally due until the date of payment.
Furthermore, if the examination is necessary due to the franchisee's failure to furnish reports, supporting records, or other information as required, or to furnish these items on a timely basis, or if Cream's examination reveals an understatement exceeding 2% of the amount that the franchisee actually reported to Cream for the period examined, the franchisee must reimburse Cream for the costs of the examination. These costs include the audit cost, charges of attorneys and independent accountants, and the travel expenses, room and board, and compensation of Cream's employees. Cream states that these remedies are in addition to its other remedies and rights under the Franchise Agreement and applicable law.