Under what conditions must a Closet Storage Concepts franchisee pay for the cost of an audit?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
Note 3: You must maintain accurate business records, reports, accounts, books and data relating
to the operation of your Franchised Business. We have the right to inspect and/or audit your business records during normal business hours. If any audit reveals that you have understated Gross Revenues by 2% or more, or if you have failed to submit reports and/or remittances for any 2 reporting periods or you do not make them available when requested, you must pay the reasonable cost of the audit, including the cost of auditors and attorneys, together with the understated amount, and amounts due for royalty and other fees as a result of the understated Gross Revenues, including interest from the date when the Gross Revenues should have been reported.
Source: Item 6 — OTHER FEES (FDD pages 13–18)
What This Means (2025 FDD)
According to Closet Storage Concepts's 2025 Franchise Disclosure Document, a franchisee may be responsible for covering the expenses associated with an audit under specific circumstances. Closet Storage Concepts retains the right to inspect and audit a franchisee's business records during normal business hours.
Should an audit reveal that the franchisee has understated gross revenues by 2% or more, the franchisee is obligated to pay the reasonable cost of the audit. This includes the expenses for auditors and attorneys. In addition to covering the audit costs, the franchisee must also remit the understated amount, along with any royalty and other fees due as a result of the understated gross revenues. Interest will also be applied from the date when the gross revenues should have been reported.
Furthermore, a Closet Storage Concepts franchisee will be responsible for the cost of the audit if they fail to submit reports and remittances for any two reporting periods or do not make the required reports available when requested. This policy incentivizes accurate and timely financial reporting from franchisees, ensuring transparency and compliance with the franchise agreement.