What is the 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.
In addition, you shall pay for all costs, as specified above, of the inspection and audit if your books and records are not produced at the time of the inspection and audit, provided that we notified you at least five (5) days prior to the scheduled inspection and audit date.
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
According to Aira Fitness's 2025 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 accountant fees, travel, lodging, and compensation for Aira Fitness's employees or agents involved in the audit.
This policy incentivizes accurate reporting of Gross Sales by Aira Fitness franchisees. Underreporting sales figures could lead to underpayment of royalties and other fees owed to the franchisor. The audit provision allows Aira Fitness to verify sales and ensure proper payments.
In addition to the reimbursement of audit costs, Aira Fitness has the right to demand that the franchisee provide financial statements prepared by an independent certified public accountant at the franchisee's expense if the understatement of Gross Sales exceeds the 2% threshold. Aira Fitness must provide at least five days' notice prior to the scheduled inspection and audit date.
It's important to note that the franchisee is also responsible for paying the Royalties, National Marketing Fees, and other fees, plus interest and late fees, due on the amount of the understatement, regardless of whether the understatement exceeds the 2% threshold for audit cost reimbursement.