What is the maximum interest rate City Wide can charge on an underpayment discovered during an audit?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
4 months | $2,900/mo. | | | 25 and all months thereafter | $3,350/mo. | | | Type of Fee1 | Amount | Due Date | Remarks | |-------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | | | you under the franchise | | | | | agreement | | | | | (including the Initial | | | | | Fees). The Transfer Fee is in | | | | | addition to any third-party | | | | | broker fee. No Transfer Fee is | | | | | assessed for a transfer to your | | | | | survivor. | | Audit | Amount of underpayment, plus interest at highest legal rate, not to exceed 10%. If underpayment is 2% or more, you must reimburse CITY WIDE for its audit costs. Audit costs may run as much as $6,000. | Upon billing by CITY WIDE. | Payable only if audit shows an understatement of at least 2% of Gross Sales for any month.
Source: Item 6 — OTHER FEES (FDD pages 16–20)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, if an audit reveals an underpayment of gross sales, City Wide can charge interest on the underpaid amount. The interest rate will be the highest legal rate, but it cannot exceed 10%. This interest charge is in addition to the underpayment itself.
Furthermore, if the audit reveals that the underpayment is 2% or more of Gross Sales for any month, the franchisee is also responsible for reimbursing City Wide for the costs of the audit. These audit costs could be as high as $6,000.
This policy incentivizes franchisees to accurately report their Gross Sales. Franchisees should maintain meticulous records and accounting practices to minimize the risk of underreporting and incurring these charges. It is important to note that audit costs can be substantial, especially if the underpayment threshold is exceeded.