What penalty fee does Clear Pest Pros charge if the understatement of Royalty is greater than 3%?
Clear_Pest_Pros Franchise · 2025 FDDAnswer from 2025 FDD Document
Furthermore, if we conduct an inspection or audit due to your failure to (a) furnish reports, supporting records, or other information as required, (b) furnish these items on a timely basis, (c) to record all Customer payments in the Clear Pest Pros Software within 48 hours of their receipt, or (d) use the Clear Pest Pros /Required Software for scheduling or invoicing, or we discover that an understatement of Royalty is greater than 3% for any period reviewed, you promise to reimburse us for the cost of the inspection and/or audit, including without limitation, the charges of attorneys and independent accountants, the travel, room and board expenses, and compensation of our employees. Further, if an understatement of the Royalty is greater than 3%, you also promise to pay us an additional penalty fee equal to 10% of the total amount of the understated Gross Sales.
These remedies are in addition to our other remedies and rights under this Agreement and applicable law.
Source: Item 22 — CONTRACTS (FDD pages 67–68)
What This Means (2025 FDD)
According to Clear Pest Pros's 2025 Franchise Disclosure Document, if an audit reveals that a franchisee has understated their royalty payments by more than 3%, Clear Pest Pros will impose a penalty. In addition to the franchisee reimbursing Clear Pest Pros for the cost of the audit, which includes attorney and accountant fees, travel, and employee compensation, the franchisee must pay a penalty fee.
The penalty fee is calculated as 10% of the total amount of the understated gross sales. This is on top of covering the expenses Clear Pest Pros incurs for the audit itself.
This policy underscores the importance of accurate financial reporting and timely royalty payments for Clear Pest Pros franchisees. Franchisees should ensure they have systems in place to track and report gross sales accurately to avoid triggering an audit and potential penalties. The FDD emphasizes that these remedies are in addition to any other rights Clear Pest Pros has under the agreement or applicable law, meaning Clear Pest Pros could pursue additional legal or contractual remedies.