What is the consequence if the understatement of Gross Revenues for a Basecamp Fitness studio equals 2% or more for any period?
Basecamp_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
If any audit discloses an understatement of the Gross Revenues of your Basecamp Studio for any period or periods, you will, within five (5) days of receiving the audit report, pay to all Royalty Fees and General Advertising and Marketing Fund Contributions due on the previously unreported Gross Revenues, plus late payment charges.
In addition, if an understatement for any period equals two percent (2%) or more of the Gross Revenues of your Basecamp Studio for the period, you must reimburse us for the cost of the audit, including, without limitation, the charges of the person auditing your records, and their travel and living expenses.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Basecamp Fitness's 2025 Franchise Disclosure Document, if an audit reveals that a franchisee has understated their Gross Revenues by 2% or more for any given period, the franchisee is responsible for covering the expenses associated with the audit. This includes the auditor's fees, along with their travel and living costs.
In addition to covering the audit costs, the franchisee is also obligated to pay all Royalty Fees and General Advertising and Marketing Fund Contributions due on the previously unreported Gross Revenues. These payments are subject to late payment charges, which further increases the financial burden on the franchisee.
This policy incentivizes accurate financial reporting from Basecamp Fitness franchisees. Underreporting revenues not only deprives the franchisor of its due royalties and advertising contributions but can also lead to significant additional expenses for the franchisee if discovered during an audit. Franchisees should maintain meticulous records and ensure accurate reporting to avoid these penalties.