Under what condition is a City Wide franchisee required to pay audit costs?

According to City Wide's 2025 Franchise Disclosure Document, a franchisee is required to cover the costs of an audit under specific circumstances. If an audit reveals that the franchisee has understated their Gross Sales by 2% or more for any given month, the franchisee is responsible for reimbursing City Wide for the audit expenses. These audit costs can reach up to $6,000. The franchisee will also need to pay the amount of underpayment plus interest at the highest legal rate, but not exceeding 10%.

This provision serves as a financial protection for City Wide, ensuring accurate reporting of Gross Sales, which directly impacts royalty payments. It also incentivizes franchisees to maintain meticulous and transparent accounting practices. The audit costs are only imposed if a significant underreporting is discovered, setting a threshold of 2% or more to trigger the cost reimbursement.

For a prospective City Wide franchisee, this highlights the importance of accurate financial record-keeping and reporting. Franchisees should implement robust accounting systems and regularly review their sales data to ensure compliance. Understanding this policy and maintaining accurate records can help franchisees avoid unexpected audit costs and maintain a positive financial relationship with City Wide.