Under what condition is a Card My Yard franchisee required to pay an audit fee?
Card_My_Yard Franchise · 2025 FDDAnswer from 2025 FDD Document
| Liquidated Damages (Termination) | An amount equal to the greater of: (a) $6,600 or (b) the total royalties paid by you during the previous 12 months multiplied by two. If your Card My Yard business has not been open for at least 12 months, then your liquidated damages amount will be $6,600. | Upon your unauthorized closure of your Card My Yard business or any termination of the Franchise Agreement in connection with a breach by you. | This fee compensates us for your unauthorized closure of the Card My Yard business or any termination of the Franchise Agreement in connection with a breach by you. |
|---|---|---|---|
| Liquidated Damages (Non Reporting or Underreporting) | An amount equal to $5,000 per occurrence will be owed for each instance when we document your intentional non-reporting or under-reporting of revenues that you realize and receive from your Card My Yard business. | On demand | This fee compensates us for the time, expense, legal fees, and related costs associated with non-reporting, under reporting and intentional withholding of royalty and related obligations associated with revenue in the event that you intentionally omit revenues from your reporting. |
| Audit Fee | Cost of audit | When billed | Payable if an examination or audit shows you have understated any amount owed to us by 2% or more. |
Source: Item 6 — OTHER FEES (FDD pages 15–23)
What This Means (2025 FDD)
According to Card My Yard's 2025 Franchise Disclosure Document, a franchisee is required to pay an audit fee if an examination or audit reveals that they have understated the amount owed to Card My Yard by 2% or more. The audit fee covers the cost of the audit and is payable when billed. This policy incentivizes accurate financial reporting from franchisees, ensuring that Card My Yard receives the correct royalty and other payments.
For a prospective Card My Yard franchisee, this means maintaining meticulous records and diligently calculating all revenues and associated payments to the franchisor. Underreporting, even unintentionally, by 2% or more can trigger an audit and the associated costs. Franchisees should implement robust accounting practices and consider seeking professional advice to ensure compliance with Card My Yard's reporting requirements.
It is important to note that the audit fee is in addition to any other penalties or remedies Card My Yard may pursue for underreporting, such as interest on late payments or legal action. Franchisees should view accurate reporting as a critical aspect of their business operations to avoid these potential financial and legal repercussions. This audit policy is a fairly standard practice in franchising, designed to protect the franchisor's revenue stream and ensure fairness across the franchise system.