Can Ella Cafe request revenue and sales reports directly from the franchisee?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
ue on the date prescribed by Franchisor and will be signed by an authorized representative, attesting to their accuracy. Within 30 days following the end of each calendar quarter, Franchisee must provide to Franchisor a copy of the Coffee House's profit and loss statements prepared according to generally accepted accounting principles and which accurately reflect the Coffee House's financial information for the applicable Accounting Periods.
Franchisor may require that Franchisee submit the profit and loss statements in a standardized format that Franchisor provides to all of our franchisees. Franchisee also must provide Franchisor such other reports, computer back-up, and other information that Franchisor may reasonably request.
- 10.7. Audit of Franchisee Records. Franchisor or its designated agent has the right to audit, examine, and copy Franchisee's books, records, accounts, and business tax returns at any time. If an inspection or audit reveals underpayment of amounts owed to Franchisor, Franchisee must immediately pay the understated amount with interest as provided in Section 4.8. If an audit or inspection reveals an understatement of Gross Sales by 3% or more for any Accounting Period then, in addition to amounts due on the understatement and interest, Franchisee must promptly reimburse Franchisor all costs and expenses that it incurred in connection with performing the audit or inspection (including travel, lodging, and wage expenses and attorneys' and accountants' fees).
- 10.8. Use of Financial Information in Franchise disclosure document. Franchisee acknowledges and agrees that it may be in the best interest of the franchise system to share historical revenue and expense information with prospective franchisees. To that end, Franchisee hereby authorizes Franchisor to publish information concerning the Coffee House's Gross Sales and other information reported to Franchisor in its franchise disclosure document and in other reports which may be presented to existing System franchisees.
- (a) Legal Actions and Investigations. Franchisee shall promptly notify Franchisor of any Action or threatened Action by any customer, governmental authority, or other third party against Franchisee or the Business, or otherwise involving the Franchisee or the Business. Franchisee shall provide such documents and information related to any such Action as Franchisor may request.
- (b) Government Inspections. Franchisee shall give Franchisor copies of all inspection reports, warnings, certificates, and ratings issued by any governmental entity with respect to the Business, within three days of Franchisee's receipt thereof.
- (c) Other Information. Franchisee shall submit to Franchisor such other financial statements, budgets, forecasts, reports, records, copies of contracts, documents related to litigation, tax returns, copies of governmental permits, and other documents and information related to the Business as specified in the Manual or that Franchisor may reasonably request.
- 10.9 Taxes. Franchisee must promptly pay all taxes due and owing based on its operation of the Coffee House and the Business Entity including, without limitation, sales taxes, income taxes, and property taxes.
ARTICLE 11. FRANCHISOR RIGHTS
11.1 Manual; Modification. The Manual, and any part of the Manual, may be in any form or media determined by Franchisor.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, Ella Cafe can request revenue and sales reports from franchisees. Franchisees must submit profit and loss statements in a standardized format provided by Ella Cafe. Additionally, franchisees must provide other reports, computer back-ups, and information that Ella Cafe may reasonably request.
Ella Cafe or its agent has the right to audit the franchisee's financial records at any time. If an audit reveals underpayment of amounts owed to Ella Cafe, the franchisee must immediately pay the understated amount with interest. If the audit reveals an understatement of Gross Sales by 3% or more for any Accounting Period, the franchisee must reimburse Ella Cafe for all costs and expenses incurred in connection with the audit, including travel, lodging, wage expenses, and attorneys' and accountants' fees.
Furthermore, Ella Cafe is authorized to publish information concerning the Coffee House's Gross Sales and other information reported to Ella Cafe in its franchise disclosure document and in other reports which may be presented to existing System franchisees. Franchisees are also required to submit financial statements, budgets, forecasts, reports, records, copies of contracts, documents related to litigation, tax returns, copies of governmental permits, and other documents and information related to the Business as specified in the Manual or that Ella Cafe may reasonably request.
Franchisees must prepare and preserve complete and accurate books, records, and accounts for at least five years according to generally accepted accounting principles and in the form Ella Cafe prescribes. Franchisees must also provide copies of their charter documents and governing documents, along with any amendments. They must promptly provide any additional information Ella Cafe requests concerning all persons who may have any direct or indirect financial interest in the Business Entity or the Coffee House. No later than March 31 of each calendar year, franchisees must provide Ella Cafe with a copy of the previous year's annual profit and loss statements, a copy of the previous year's sales tax returns, and, if requested, a copy of federal and state income tax returns for the previous year.