Under what circumstances must a Noodles & Company franchisee reimburse the franchisor for the cost of an audit?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
YOUR NOODLES & COMPANY RESTAURANT; AUDITS.
13.01 Inspections. We and our designees have the right at any reasonable time and without prior notice to: (a) inspect your Noodles & Company Restaurant; (b) observe, photograph, audio-tape and/or video tape the operations of your Noodles & Company Restaurant; (c) remove samples of any food and beverage products, materials or supplies for testing and analysis; and (d) interview personnel and customers of your Noodles & Company Restaurant. You agree to cooperate fully with such activities. You shall furnish to us immediately upon receipt by you all inspection reports, citations or warnings received from municipal or other authorities.
13.02 Audits. We have the right at any time during business hours, and on 10 days' prior notice to you, to inspect, copy and audit the books, records, tax returns and documents relating to the development, ownership, lease, occupancy or operation of your Noodles & Company Restaurant. You must cooperate fully with our representatives and independent accountants conducting such audits. If any inspection or audit discloses an understatement of Net Royalty Sales, you must pay us, within seven days after receipt of the audit report, the royalties and any advertising contributions due on the amount of such understatement, plus interest (as provided in Section 6.05) from the
Source: Item 23 — RECEIPT (FDD pages 99–350)
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, a franchisee may be required to reimburse Noodles & Company for the cost of an audit under specific circumstances. Noodles & Company has the right to audit a franchisee's financial records, and if an audit reveals an understatement of Net Royalty Sales, the franchisee is responsible for paying the owed royalties, advertising contributions, and interest.
Specifically, a Noodles & Company franchisee must reimburse the franchisor for the cost of the audit if either of the following conditions are met: first, if the audit was made necessary due to the franchisee's failure to provide reports, records, or information on time. Second, if the audit reveals that the understatement of Net Royalty Sales is greater than 1% for the audited period.
The reimbursement covers the full cost of the audit, including charges from attorneys and independent accountants, travel expenses, room and board, and compensation for Noodles & Company's employees, attorneys, and independent accountants involved in the audit. Additionally, the franchisee must pay a fixed amount of $3,500 (or the amount in the then-current Franchise Agreement used for new franchises) to offset Noodles & Company's internal costs related to the audit. This provision ensures that Noodles & Company is compensated for the expenses incurred when a franchisee's reporting deficiencies or sales understatements necessitate a detailed audit.