Under what conditions might Cream debit 110% of the average Net Sales from a Cream franchisee's account?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
If you fail to report Net Sales, if we cease to have access to your Computer System, or if your Shop is closed without our authorization for any period of time, then for any fees under the Franchise Agreement which are calculated based on Net Sales, we may debit your account for 110% of the average Net Sales for the last three months of operations of your Shop. If the amounts that we debit from your account on the basis of any understatement are less than the amounts you actually owe us once we have determined the true and correct Net Sales, we will debit your account for the balance on the day we specify. If the amounts that we debit from your account on the basis of any understatement are greater than the amounts you actually owe us, we will credit the excess against the amounts we otherwise would debit from your account during the following period.
Source: Item 6 — OTHER FEES (FDD pages 13–17)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, Cream can debit 110% of the average Net Sales from a franchisee's account under specific circumstances related to reporting and operational compliance. This action is triggered if a franchisee fails to report Net Sales, if Cream loses access to the franchisee's Computer System, or if the Cream shop is closed without authorization for any period of time. This debit covers fees calculated based on Net Sales, ensuring Cream receives compensation even when accurate sales data is unavailable due to the franchisee's actions or omissions. The amount debited is based on 110% of the average Net Sales for the last three months of the shop's operation.
This policy serves as a deterrent against non-compliance and ensures Cream can maintain its revenue stream despite potential disruptions caused by franchisees. The 110% figure acts as a penalty, incentivizing accurate and timely reporting, maintaining system access, and preventing unauthorized closures. It also provides Cream with a buffer to account for potential underreporting or lost revenue during the period of non-compliance.
Cream also addresses scenarios where the initial debit based on estimated Net Sales differs from the actual amount owed. If the debited amount is less than what is truly owed, Cream will debit the remaining balance from the franchisee's account. Conversely, if the debited amount exceeds the actual amount owed, Cream will credit the excess amount against future debits. This reconciliation process ensures fairness and accuracy in financial transactions between Cream and its franchisees.
For a prospective Cream franchisee, this policy highlights the importance of adhering to reporting requirements, maintaining operational standards, and communicating openly with Cream. Failure to do so can result in financial penalties and potential disruptions to the franchisee's business operations. It is crucial for franchisees to understand these conditions and implement measures to ensure compliance, thereby avoiding the imposition of the 110% debit and maintaining a positive relationship with Cream.