Under what condition will an All Team franchisee be required to pay for an audit conducted by ATFC?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
If it is found that FRANCHISEE under-reported Temporary Employment Gross Billings and/or Permanent Placement Gross Billings, FRANCHISEE will reimburse ATFC for the amount of the Fees charges that would have been billed had billings been reported accurately, plus interest on those amounts at the rate of the lesser of one and one-half percent (1½%) per month or the maximum legal rate in the jurisdiction where the Agency is located. In addition, in the event that an audit by ATFC results in a determination that any or all of the Fees paid to ATFC are deficient (underpaid) by more than one percent (1%), the FRANCHISEE shall promptly pay to ATFC any amounts shown to be due and all costs and expenses incurred by ATFC in conducting the subsequent audit to determine that the FRANCHISEE is reporting correctly (not the audit which disclosed the original deficiency), including salaries of the ATFC's representatives, travel costs, room and board and audit fees. Nothing contained herein shall constitute an agreement by ATFC to accept any payments after the same are due or commitment by ATFC to extend credit to or otherwise finance the FRANCHISEE's operation of the Agency. The obligations of this provision survive termination or expiration of the Agreement.
Source: Item 22 — CONTRACTS (FDD pages 33–34)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, a franchisee may be required to cover the costs and expenses of an audit conducted by ATFC under specific circumstances related to the accuracy of their financial reporting. If an audit reveals that the franchisee underpaid fees to All Team by more than 1% due to underreporting of Temporary Employment Gross Billings and/or Permanent Placement Gross Billings, the franchisee becomes responsible for the costs associated with a subsequent audit. This subsequent audit is to determine that the franchisee is reporting correctly.
The costs the franchisee would be responsible for include salaries of All Team's representatives, travel costs, room and board, and the audit fees themselves. This means that All Team franchisees must ensure accurate reporting of their gross billings to avoid triggering an audit and the associated expenses. The FDD specifies that the franchisee will also be responsible for paying the deficient fees, plus interest, if underreporting is discovered. The interest rate is the lesser of one and one-half percent (1½%) per month or the maximum legal rate in the jurisdiction where the Agency is located.
This provision highlights the importance of maintaining meticulous financial records and adhering to All Team's reporting requirements. The financial burden of an audit can be significant, potentially impacting the franchisee's profitability. Furthermore, these obligations survive the termination or expiration of the Franchise Agreement, meaning that even after the franchise relationship ends, the franchisee may still be liable for audit costs related to past underreporting. This is not uncommon in franchising, as franchisors need to ensure accurate royalty payments and protect the integrity of the brand.