What is the financial threshold for understatement of Gross Revenues that triggers a Beehive Homes franchisee to reimburse audit costs?

According to Beehive Homes's 2025 Franchise Disclosure Document, a franchisee may be responsible for reimbursing audit costs if an audit reveals a significant understatement of gross revenues. Specifically, if an audit uncovers that the franchisee has understated their Gross Revenues by 2% or more for any period, the franchisee is required to cover the costs of the audit. This provision is in place because Beehive Homes relies on accurate reporting of Gross Revenues to calculate royalties, which are 5% of Gross Revenues.

This policy incentivizes franchisees to maintain accurate financial records and report their Gross Revenues honestly. The audit fees could be substantial, depending on the scope and complexity of the audit, so it is in the franchisee's best interest to ensure their financial reporting is accurate. This audit can be initiated by Beehive Homes.

It is important to note that Beehive Homes has the right to audit a franchisee's financial reports and information at their own expense. However, the responsibility for audit costs shifts to the franchisee only when the understatement threshold is met. This threshold applies to 'any period,' meaning it could be a month, quarter, or year. Franchisees should consult with a financial professional to ensure compliance with Beehive Homes's reporting requirements and to minimize the risk of triggering an audit and potential reimbursement of audit costs.