Under what conditions is a Chatime franchisee required to pay an audit fee?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
| Fee(1) Type of | Amount | Due Date | Remarks |
|---|---|---|---|
| Audit Fee | Cost of audit | As invoiced | Payable if (i) we find that you have understated any amount you owe to us by more than 2%, or (ii) you fail to furnish reports, supporting records, other information or financial statements as required on a timely basis and we believe an audit is necessary. The Audit Fee includes accountants' fees, legal fees, and associated travel and accommodation expenses for our employees. |
Source: Item 6 — Other Fees (FDD pages 13–17)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee may be required to pay an audit fee under specific circumstances. The audit fee, which covers the cost of the audit, becomes payable if Chatime finds that the franchisee has understated any amount owed to them by more than 2%. This fee also applies if the franchisee fails to furnish reports, supporting records, other information, or financial statements as required on a timely basis, and Chatime deems an audit necessary.
The audit fee is not a fixed amount but rather covers the cost Chatime incurs. This includes accountants' fees, legal fees, and associated travel and accommodation expenses for Chatime's employees. Therefore, the franchisee is responsible for covering all expenses Chatime incurs while performing the audit under the conditions mentioned above.
This policy is fairly standard in franchising, as franchisors need to ensure accurate reporting and compliance with financial obligations. The 2% threshold provides some leeway for minor discrepancies, but consistent and accurate reporting is crucial for a Chatime franchisee to avoid triggering an audit and incurring these potentially significant costs.