Under what condition will a Basecamp Fitness franchisee be required to reimburse Basecamp Fitness for the cost of an audit?
Basecamp_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
We will have the right to audit or cause to be audited any financial information you provide to us, and your books, records, and sales and income tax returns.
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, a franchisee will be required to reimburse Basecamp Fitness for the cost of an audit under specific circumstances related to the understatement of gross revenues. If an audit reveals that the franchisee has understated their Gross Revenues for any period, they are obligated to pay all Royalty Fees and General Advertising and Marketing Fund Contributions due on the previously unreported Gross Revenues, along with late payment charges, within five days of receiving the audit report.
More specifically, the obligation to reimburse Basecamp Fitness for the audit costs arises if the understatement equals or exceeds two percent (2%) of the Gross Revenues for the audited period. In such cases, the franchisee must cover the full cost of the audit. This includes not only the charges from the auditing firm or person conducting the audit but also their associated travel and living expenses.
This provision serves as a financial deterrent against underreporting revenues. It ensures that Basecamp Fitness franchisees accurately report their earnings, as significant understatements can lead to substantial financial penalties, including covering the costs of the audit itself. This policy is in place to protect the integrity of the financial reporting system and ensure fair contributions to royalty and marketing funds across all franchise locations.