Under what conditions will a Noodles & Company franchisee be required to pay for an audit?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
| Interest on late payments | 1.5% per month or the maximum rate allowed by law, whichever is less | Immediately | The interest rate applies to any money you owe us or any of our affiliates after the due date; payment made by electronic withdrawal. |
|---|---|---|---|
| Fees to evaluate and approve alternative suppliers | Our reasonable costs and expenses, which currently are expected to range between $0 and $2,000 per sku, although costs could greatly exceed those amounts depending on the product | Upon receipt of our bill | We may impose reasonable inspections and supervision fees to cover our costs in evaluating and maintaining alternative brands or suppliers you propose in accordance with the Franchise Agreement; payment made by electronic withdrawal. |
| Audit | Cost of audit, which is expected to range between $3,000 and $4,000, if a discrepancy is found in accordance with the Franchise Agreement | Completion of audit | Payable only if you fail to furnish required information or if we find an understatement of Net Royalty Sale |
Source: Item 6 — OTHER FEES (FDD pages 19–22)
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, a franchisee may be required to pay for an audit under specific circumstances. The cost of the audit is estimated to range between $3,000 and $4,000. This payment is only required if the franchisee fails to furnish required information or if an understatement of Net Royalty Sales greater than 1.0% is discovered during the audit. Payment for the audit is made via electronic withdrawal.
This condition is fairly standard in franchising. Franchisors need to ensure accurate reporting of sales to calculate royalties correctly. The threshold of a 1.0% understatement provides some leeway for minor discrepancies, but significant underreporting can trigger an audit at the franchisee's expense. This policy incentivizes franchisees to maintain accurate records and submit required information promptly.
For a prospective Noodles & Company franchisee, it's crucial to understand the reporting requirements and maintain meticulous records of all sales. Implementing robust accounting practices and regularly reviewing sales data can help avoid unintentional underreporting. Being proactive in providing all necessary information to Noodles & Company can also prevent the need for an audit and the associated costs. Franchisees should clarify with Noodles & Company what constitutes 'required information' to ensure full compliance.
It is important to note that the FDD specifies that the audit cost is 'expected' to range between $3,000 and $4,000. This implies that the actual cost could vary depending on the complexity and scope of the audit. Franchisees should be prepared for potential variations in audit expenses and factor this into their financial planning.