Under what condition is the Audit Fee payable for a Cr3 American Exteriors franchise?
Cr3_American_Exteriors Franchise · 2025 FDDAnswer from 2025 FDD Document
| TYPE OF FEE | AMOUNT | DUE DATE (Note 2) | REMARKS |
|---|---|---|---|
| (Note 1) | |||
| Audit Fee | Cost of audit plus 18% interest per annum on underpayment and $50 per month late payment. | As invoiced | Payable if an audit discloses an under reporting of Gross Revenues or underpayment to us by 2% or more. |
Source: Item 6 — OTHER FEES (FDD pages 18–20)
What This Means (2025 FDD)
According to Cr3 American Exteriors' 2025 Franchise Disclosure Document, an Audit Fee is payable if an audit reveals that the franchisee has underreported Gross Revenues or has underpaid Cr3 American Exteriors by 2% or more. The fee covers the cost of the audit, plus an 18% annual interest on the underpayment, and a $50 per month late payment fee. The Audit Fee is invoiced to the franchisee when it is due.
This means that Cr3 American Exteriors franchisees must accurately report their Gross Revenues and make timely payments to avoid triggering an audit and incurring these additional fees. The 2% threshold provides some leeway for minor discrepancies, but consistent or significant underreporting can lead to substantial financial penalties. Franchisees should maintain meticulous records and accounting practices to ensure compliance.
Audit fees are a fairly standard component of franchise agreements. Franchisors use audits to verify the accuracy of reported revenues, which directly impact royalty payments. The specific terms, such as the percentage threshold for triggering the fee and the interest rate on underpayments, can vary among franchise systems. Prospective Cr3 American Exteriors franchisees should carefully review these terms and understand the potential financial implications of non-compliance.