What is the maximum interest rate City Wide can charge on underpayments 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 au
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 means that if the highest legal interest rate in the franchisee's jurisdiction is, for example, 8%, City Wide can only charge 8%. However, if the highest legal rate is 12%, City Wide is capped at charging 10%.
In addition to interest on the underpayment, City Wide can also require the franchisee to cover the costs of the audit itself. These audit costs can be as high as $6,000. However, this reimbursement for audit costs is only applicable if the audit reveals that the franchisee understated their Gross Sales by 2% or more for any given month.
This policy creates a financial risk for City Wide franchisees who may unintentionally misreport their Gross Sales. Franchisees should ensure accurate record-keeping and reporting to avoid potential interest charges and audit fees. It is also important to note that these fees are payable upon billing by City Wide.