Under what conditions will a Cinch I.T. franchisee be charged for audits?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
| TYPE OF FEE1 | AMOUNT | DUE DATE | REMARKS |
|---|---|---|---|
| to client | must pay us for our time and any compensation (i.e., replacement product) given to clients. | ||
| Audits | Cost of audit plus interest on underpayment | As incurred | Payable only if audit shows understatement is willful or if 2% or more of gross sales for a two month period. |
| Interest | Interest on overdue payment | As incurred | Interest rate will be 1.5% per month or if the maximum interest rate permitted by state law is less, then interest will be charged at the lesser allowed rate. Interest begins from the date payment was due. |
Source: Item 6 — OTHER FEES (FDD pages 14–20)
What This Means (2024 FDD)
According to Cinch I.T.'s 2024 Franchise Disclosure Document, a franchisee will be charged for audits under specific circumstances related to the accuracy of their reported gross sales. The cost of the audit, along with interest on any underpayment, will be payable by the franchisee if an audit reveals that the understatement of gross sales was willful.
Additionally, Cinch I.T. will charge a franchisee for the cost of the audit plus interest on the underpayment if the audit shows that the understatement is 2% or more of gross sales for a two-month period. This condition suggests that even unintentional errors that meet this threshold can result in the franchisee incurring audit costs.
These audit-related fees are due as incurred, meaning Cinch I.T. can demand immediate payment upon completion of the audit and determination of the fees. It is important for prospective franchisees to maintain accurate records and diligently report gross sales to avoid triggering these audit conditions and associated costs.