What is the financial threshold for understatement of Gross Sales that triggers reimbursement of audit costs for an Aira Fitness franchise?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
Further, if the audit is made necessary by your failure to furnish reports, financial statements, tax returns or schedules as herein required, or if an understatement of Gross Sales for any period is determined by any such inspection or audit to be greater than two percent (2%), you shall reimburse usfor the cost of such inspection or audit including, without limitation, the charges of attorneys and independent accountants and the travel expenses, room and board, and compensation of our employees or agents, and we shall have the right to require you to furnish, at your sole cost and expense, financial statements prepared by an independent certified public accountant thereafter.
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
According to the 2025 Aira Fitness Franchise Disclosure Document, if an audit reveals that a franchisee has understated their Gross Sales by more than two percent (2%), the franchisee is responsible for reimbursing Aira Fitness for the cost of the audit. This reimbursement covers expenses such as attorney and independent accountant fees, travel, lodging, and compensation for Aira Fitness employees or agents involved in the audit.
This policy incentivizes accurate reporting of Gross Sales by Aira Fitness franchisees. Underreporting sales not only affects the royalties and fees owed to Aira Fitness but can also lead to financial penalties for the franchisee. The 2% threshold provides a small margin of error, but any significant understatement will trigger the cost reimbursement provision.
Additionally, Aira Fitness may require the franchisee to provide financial statements prepared by an independent certified public accountant at the franchisee's expense following such an audit. This requirement ensures ongoing financial transparency and accuracy in reporting. Franchisees should maintain meticulous records and reporting practices to avoid triggering an audit and potential cost reimbursement.
It's important to note that Aira Fitness also has the right to inspect and audit a franchisee's business operations, records, and reports at any time without prior notice. This includes the right to enter the Aira Fitness Business to conduct these inspections. Franchisees should be prepared for such audits and maintain organized and accurate financial records.