How are misstatements defined in the context of the Card My Yard audit?
Card_My_Yard Franchise · 2025 FDDAnswer from 2025 FDD Document
If any required payments to us are delinquent, or if an examination or audit should reveal that any payments have been understated in any report to us, then you must pay to us upon demand the amount overdue or understated with interest determined in accordance with Section V.I. If an examination or audit discloses an understatement in any report of two percent (2%) or more, you must, in addition, reimburse us for all costs and expenses connected with the audit (including, without limitation, legal and accounting fees and costs). These remedies shall be in addition to any other remedies we may have atlaw or in equity.
Source: Item 23 — RECEIPTS (FDD pages 84–259)
What This Means (2025 FDD)
According to Card My Yard's 2025 Franchise Disclosure Document, if an audit reveals that any payments have been understated in any report to Card My Yard, the franchisee must pay the amount overdue or understated with interest. Furthermore, if the understatement in any report is two percent (2%) or more, the franchisee must reimburse Card My Yard for all costs and expenses connected with the audit, including legal and accounting fees and costs. These remedies are in addition to any other remedies Card My Yard may have at law or in equity.
This means that Card My Yard franchisees must maintain accurate financial records and report sales and payments correctly. Failure to do so can result in additional payments, interest charges, and responsibility for audit costs. The threshold for triggering the reimbursement of audit costs is relatively low at 2%, so franchisees need to ensure their reporting is precise.
Franchisors commonly retain the right to audit franchisee records to ensure compliance with reporting and payment obligations. The specific penalties for underreporting can vary, but typically include payment of the understated amount plus interest. The requirement to cover audit costs when errors exceed a certain percentage is also a fairly standard practice in franchising, designed to deter inaccurate reporting.