What is the threshold for underpayment that triggers an Audit Fee for a Cr3 American Exteriors franchise?

According to Cr3 American Exteriors's 2025 Franchise Disclosure Document, an Audit Fee is incurred if an audit reveals an underreporting of Gross Revenues or underpayment to Cr3 American Exteriors by 2% or more. This fee covers the cost of the audit itself, plus an 18% interest per annum on the underpayment amount, and a $50 per month late payment fee. The Audit Fee is invoiced to the franchisee.

For a prospective Cr3 American Exteriors franchisee, this means that accurately reporting Gross Revenues and making timely payments is crucial to avoid triggering an audit and incurring these additional fees. The 2% threshold is relatively low, so even small errors in accounting or delayed payments could lead to an audit. The 18% interest on underpayments is a significant penalty, much higher than typical interest rates, and the $50 monthly late fee adds to the financial burden.

Franchisees should implement robust accounting practices and internal controls to ensure accurate reporting and timely payments. Regularly reviewing financial records and reconciling accounts can help identify and correct any discrepancies before they trigger an audit. It would be prudent for a prospective franchisee to clarify with Cr3 American Exteriors the specific procedures and criteria used for conducting audits to fully understand the risk and compliance requirements.