If an audit reveals underpayment to Boulder Designs, what must the franchisee immediately pay?
Boulder_Designs Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor or its designee has the right, during normal business hours, to examine copy and audit the books, records and tax returns (both the business returns and Franchisee personal income tax returns) of Franchisee. If the audit or any other inspection should reveal that any payments to Franchisor have been underpaid, then Franchisee shall immediately pay to Franchisor the amount of the underpayment plus late fees and interest as defined in Section 3.7. If the audit is conducted due to (i) Franchisee's failure to provide required reports to us, or (ii) if any such inspection or audit reveals an underpayment of 2% or more of the amount due for any period covered by the audit, then Franchisee shall in addition, reimburse Franchisor for any and all costs and expenses connected with the inspection (including, without limitation, travel expenses and reasonable accounting and attorneys' fees). Franchisee shall also pay interest from the date such amount was due until paid at the rate of one and one-half percent (1.5%) per month (or the rate legally allowed by the law of the state where Franchisee is located, whichever is lower). In addition to any other rights Franchisor may have, including the right to Terminate this Agreement, Franchisor may conduct such further periodic audits and/or inspections of Franchisee's books and records as we reasonably deem necessary for up to one year thereafter at Franchisee's sole expense, including, without limitation, reasonable professional fees, travel, and lodging expenses directly related thereto. The foregoing remedies shall be in addition to any other remedies Franchisor may have.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Boulder Designs' 2025 Franchise Disclosure Document, if an audit reveals that a franchisee has underpaid Boulder Designs, the franchisee must immediately pay the amount of the underpayment, along with late fees and interest as defined in Section 3.7 of the franchise agreement.
Additionally, if the audit was prompted by the franchisee's failure to provide required reports or if the underpayment is 2% or more of the amount due for any period covered by the audit, the franchisee must reimburse Boulder Designs for all costs and expenses connected with the inspection. These costs include travel expenses, reasonable accounting fees, and attorney's fees.
The franchisee will also be required to pay interest on the underpaid amount from the date it was originally due until it is paid. The interest rate is 1.5% per month, or the maximum rate legally allowed by the law of the state where the franchisee is located, whichever is lower. Boulder Designs may also conduct further periodic audits and/or inspections of the franchisee's books and records for up to one year thereafter at the franchisee's expense if deemed reasonably necessary.