Under what conditions will an Amerispec Inspection Services franchisee reimburse the company for audit costs?
Amerispec_Inspection_Services Franchise · 2025 FDDAnswer from 2025 FDD Document
tax returns specified above to the Company and hereby waive any right to refuse to provide tax return or any privilege afforded by state or federal laws, rules or regulations.
- 12.5 Audit Costs. The Company shall also have the right, at any time, to have an independent audit made at its cost of the books of the Franchisee. Franchisee shall pay the cost of the audit. These costs shall be capped at $2,000, subject to the terms of this paragraph. If Franchisee fails to fully cooperate with any reasonable request by the Company for an audit or inspection, Franchisee shall reimburse the Company for any and all costs and expenses of conducting an audit or inspection including, without limitation, travel expenses, room and board, and compensation of persons employed by the Company to make the audit or inspection. If any audit discloses an understatement of the Gross Receipts of the Franchised Business for any period or periods, the Franchisee, within 10 days of receipt of the audit report, shall pay to the Company the Advertising Contributions and Royalties, if any, due on the previously unreported Gross Receipts, plus interest from the due date at the maximum rate permitted by law, not to exceed 1.5% per month. In addition, if an understatement for any period equals 3% or more of the Gross Receipts of the Franchised Business
for the period, the Franchisee shall reimburse the Company for the full cost of the audit or inspection, including, without limitation, the charges of any independent accountant or attorney and the travel expenses, room and board, and compensation of persons employed by the Company to make the audit or inspection. Reimbursement to the Company for the costs of the audit or inspection shall be made upon the receipt
Source: Item 23 — Receipts (FDD pages 47–172)
What This Means (2025 FDD)
According to the 2025 Amerispec Inspection Services FDD, a franchisee may have to reimburse the company for audit costs under specific circumstances. Generally, Amerispec Inspection Services has the right to conduct independent audits of a franchisee's books at its own expense. However, the franchisee is responsible for the cost of the audit if they fail to fully cooperate with any reasonable request by the company during the audit or inspection process. These costs are capped at $2,000, but this limit does not apply to uncooperative franchisees.
Additionally, if an audit reveals an understatement of gross receipts, the franchisee is obligated to pay the owed advertising contributions and royalties on the unreported gross receipts, along with interest. More significantly, if the understatement equals 3% or more of the gross receipts for any period, the franchisee must reimburse Amerispec Inspection Services for the entire cost of the audit or inspection. This reimbursement covers all expenses, including charges from independent accountants or attorneys, as well as travel, lodging, and compensation for company personnel involved in the audit.
Franchisees should be aware that these audit provisions could result in significant unexpected expenses if they are found to be non-compliant or if discrepancies arise in their reported gross receipts. It is crucial for franchisees to maintain accurate records and cooperate fully with any audit requests to avoid these potential costs. The agreement specifies that costs not reimbursed within 10 days of receiving an invoice will accrue interest at the maximum rate permitted by law, not exceeding 1.5% per month, adding further financial burden for late payments.