When is the reimbursement of audit costs due from a Cost Cutters Family Hair Salon franchisee?
Cost_Cutters_Family_Hair_Salon Franchise · 2024 FDDAnswer from 2024 FDD Document
| Type of Fee(1) | Amount | Date Due | Remarks |
|---|---|---|---|
| the preceding quarter | accounting of the previous quarter's | ||
| expenditures for approved local media | |||
| and advertising promotion. If you | |||
| failed to spend at least 1% of Gross | |||
| Revenues for approved local media | |||
| advertising and promotion, you must | |||
| pay us the amount by which 1% of | |||
| your Gross Revenues for the | |||
| preceding quarter exceeded your | |||
| actual expenditure toward local media | |||
| advertising and promotion for that | |||
| quarter, and we will spend that | |||
| amount for local advertising or | |||
| promotion deemed to be in the best | |||
| interest of your business. | |||
| Tax Reimbursement | Reimbursement of COST CUTTER'S tax payments | When billed | You must reimburse Cost Cutters for taxes it must pay due to your operations (including any sales tax and/or gross receipts tax Cost Cutters must pay based on Continuing Fees and/or Advertising Fees paid or payable by you but not including income taxes paid by Cost Cutters on account of your Continuing Fees and Advertising Fees). |
| Reimbursement of Audit Costs | The unpaid amounts due, plus our administrative fee and interest from the date originally due until the date of payment. | Immediately after receipt of audit report | If an inspection or audit is necessary due to your failure to furnish reports, supporting records, or other information as required or on a timely basis, or if our examination reveals an understatement exceeding two percent (2%) of the amount you actually reported to us for the period examined, you must reimburse our costs for the examination, including, without limitation, legal fees, independent accountants' fees, and compensation and travel related expenses for our employees. |
Source: Item 6 — OTHER FEES (FDD pages 26–30)
What This Means (2024 FDD)
According to Cost Cutters Family Hair Salon's 2024 Franchise Disclosure Document, reimbursement of audit costs is due immediately after receipt of the audit report. This fee covers Cost Cutters Family Hair Salon's expenses for an inspection or audit if it becomes necessary due to a franchisee's failure to furnish reports, records, or other required information on time.
Additionally, Cost Cutters Family Hair Salon will charge this fee if an examination reveals an understatement exceeding two percent (2%) of the amount the franchisee actually reported to them for the period examined. The reimbursement covers costs for the examination, including legal fees, independent accountants' fees, and compensation and travel-related expenses for Cost Cutters Family Hair Salon employees.
This means a Cost Cutters Family Hair Salon franchisee must maintain accurate and timely records to avoid triggering an audit and the associated reimbursement costs. The two percent threshold for understatement is relatively tight, so franchisees need to ensure their reporting is precise. Failing to do so could result in unexpected expenses for legal, accounting, and travel fees incurred by Cost Cutters Family Hair Salon during the audit process.