Under what conditions are audit expenses payable by a Monicals Pizza franchisee?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Audit Expenses2 | All costs and expenses associated with audit | Upon demand | Audit costs payable only if the audit shows you have not spent at least 2% of your monthly gross sales on local advertising or if you underreported amounts you owe us by 3% or more. |
Source: Item 6 — OTHER FEES (FDD pages 10–12)
What This Means (2025 FDD)
According to Monicals Pizza's 2025 Franchise Disclosure Document, franchisees are responsible for covering audit expenses under specific circumstances. The FDD specifies that audit costs are payable if an audit reveals that the franchisee has not spent at least 2% of their monthly gross sales on local advertising. Additionally, audit costs are payable if the audit uncovers that the franchisee has underreported amounts owed to Monicals Pizza by 3% or more.
This means that Monicals Pizza franchisees must accurately report their gross sales and meet the minimum spending requirement for local advertising to avoid incurring audit expenses. The actual costs can vary based on auditor rates, the scope of the audit, and the quality of the franchisee's record-keeping. Franchisees can investigate potential audit costs by contacting auditors in their area to understand prevailing rates.
It is important for prospective Monicals Pizza franchisees to maintain meticulous financial records and adhere to the advertising spending requirements outlined in the franchise agreement. Failure to do so could result in unexpected audit expenses, which can impact the profitability of the franchise. Franchisees should also ensure they understand how 'gross sales' is defined, as it excludes sales tax or use tax.