What happens if an audit discovers an underpayment of royalty fees to Crepe De Licious?
Crepe_De_Licious Franchise · 2025 FDDAnswer from 2025 FDD Document
- 12.04 Payments. You will pay us any underpayment of, and we will pay to you or credit your account for any overpayment of, royalty fees discovered by an audit.
- 12.05 Audit and Inspection Costs. You will pay us for the reasonable travel, lodging and meal expenses, and other audit and inspection costs we incur if you or your owners, officers, Designated Managers, employees, agents or representatives fail to fully cooperate with our auditors or inspectors, fail to submit required reports, or if the audit reveals that you paid us less than ninety-eight percent (98%) of the correct amount of fees for any week. You shall also pay any understated amount owed to us with applicable late fees and interest of one and one-half percent (1.5%) per month on understatement. We may publish or disclose the results of our inspections and audits. Our rights under this Section 12.05 survive for two (2) years after expiration or termination of this Agreement, or any Transfer.
Source: Item 22 — CONTRACTS (FDD page 57)
What This Means (2025 FDD)
According to the 2025 Crepe De Licious Franchise Disclosure Document, if an audit reveals an underpayment of royalty fees, the franchisee is responsible for paying the underpayment to Crepe De Licious. Conversely, Crepe De Licious will credit the franchisee's account for any overpayment of royalty fees discovered during an audit.
Furthermore, if the audit reveals that the franchisee paid less than 98% of the correct amount of fees for any week, or if the franchisee fails to fully cooperate with auditors or submit required reports, the franchisee will be responsible for covering the reasonable travel, lodging, and meal expenses, as well as other audit and inspection costs incurred by Crepe De Licious.
In addition to covering audit costs and the underpaid amount, the franchisee must also pay late fees and interest on the understated amount. The interest rate is specified as one and one-half percent (1.5%) per month on the understatement. Crepe De Licious also retains the right to publish or disclose the results of their inspections and audits. It is important to note that Crepe De Licious's rights regarding audits and inspections extend for two years after the expiration or termination of the Franchise Agreement, or any Transfer.