Under what conditions 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 an underreporting of Gross Revenues or an underpayment to Cr3 American Exteriors by 2% or more. The fee covers the cost of the audit itself, plus interest at a rate of 18% per annum on the underpayment. Additionally, a late payment fee of $50 per month is applied if the Audit Fee is not paid on time. The Audit Fee is invoiced to the franchisee.
This means that Cr3 American Exteriors franchisees must maintain accurate financial records and make timely and correct payments to the franchisor. Failure to do so can result in a costly audit and additional penalties. The 2% threshold for underreporting or underpayment is relatively low, so franchisees need to be diligent in their accounting practices.
Franchisors commonly reserve the right to audit franchisees to ensure compliance with the franchise agreement and to verify the accuracy of reported revenues. The specific terms of the audit, including the threshold for triggering an audit fee and the interest rate on underpayments, can vary from franchise to franchise. Prospective franchisees should carefully review these terms and understand their obligations.