Under what condition are City Publications franchisees required to have their financial statements reviewed or audited by a certified public accountant?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall, at its own expense, supply to Franchisor on or before the fifteenth (15th) day of the following calendar month, in a form approved by Franchisor, a balance sheet as of the last day of the preceding month and an income statement for the month and fiscal year-to-date. Additionally, Franchisee shall submit to Franchisor within sixty (60) days of the end of each fiscal year during the term of this Agreement, an income statement for the fiscal year, a balance sheet as of the last day of the fiscal year and a copy of the annual business tax returns. Such financial statements shall be prepared in accordance with generally accepted accounting principles and reviewed or audited by a certified public accountant if required by Franchisor. In addition, Franchisee shall submit to Franchisor such other periodic reports, forms and records in the manner and at the time specified in the Manual or otherwise in writing.
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to City Publications' 2025 Franchise Disclosure Document, franchisees are required to provide monthly and annual financial reports to City Publications. Specifically, franchisees must submit a balance sheet from the preceding month and an income statement for the month and fiscal year-to-date to City Publications by the 15th day of the following month. Additionally, within 60 days of the end of each fiscal year, franchisees must submit an income statement for the fiscal year, a balance sheet as of the last day of the fiscal year, and a copy of the annual business tax returns.
The FDD states that these financial statements must be prepared in accordance with generally accepted accounting principles. The financial statements must be reviewed or audited by a certified public accountant only if City Publications requires it.
This means that while franchisees are always responsible for maintaining accurate financial records and providing regular reports to City Publications, the additional expense of a formal review or audit by a CPA is only necessary if City Publications specifically mandates it. A prospective franchisee should clarify with City Publications under what circumstances a review or audit would be required.