Under what condition is a Deer Solution franchisee required to pay for an audit?
Deer_Solution Franchise · 2025 FDDAnswer from 2025 FDD Document
| Reporting Non-Compliance | $150 per occurrence | 14 days of invoice | Payable for failure to timely submit Royalty and Activity Reports, and other reports and financial statements as required under Franchise Agreement. |
|---|---|---|---|
| Operations Non-Compliance | $450 to $1,000 per occurrence | 14 days of invoice | Payable for failure to comply with operational standards as required and specified under Franchise Agreement, plus inspection and re- inspection costs incurred by us. |
| Payment Non-Compliance | $150 per occurrence | Payable for failure to timely pay, when due, a fee or payment due to us under the Franchise Agreement, plus interest, costs, and legal fees. | |
| Non-Compliance | Actual fees, costs, and expenses | On demand | Fees, costs, and expenses incurred by us as a result of your breach or non- compliance with the terms of your Franchise Agreement. |
| Legal Fees and Expenses | Costs and expenses | As incurred | This fee includes, but is not limited to, attorneys’ fees for any failure to pay amounts when due or failure to comply in any way with the Franchise Agreement. |
| Audit | Cost of audit | On demand | For costs incurred by us for each financial audit, provided the audit determines underreporting of 2% or greater during any designated audit period. Includes fees incurred by us including audit, legal, travel and reasonable accommodations. |
Source: Item 6 — OTHER FEES (FDD pages 14–19)
What This Means (2025 FDD)
According to Deer Solution's 2025 Franchise Disclosure Document, a franchisee is required to cover the costs of a financial audit if the audit reveals underreporting of 2% or greater during any designated audit period. These costs, which are due on demand, include fees incurred by Deer Solution for the audit itself, legal services, travel, and reasonable accommodations.
This provision means that Deer Solution franchisees must maintain accurate financial records and report their gross sales and other financial data honestly. If Deer Solution suspects underreporting, they can initiate an audit, and if the audit confirms underreporting above the 2% threshold, the franchisee becomes responsible for all associated expenses. This creates a financial risk for franchisees who may unintentionally or intentionally misreport their financial data.
Franchisors commonly reserve the right to audit franchisees, but the specific terms vary. Some franchisors might absorb audit costs unless the underreporting exceeds a higher threshold, or if the underreporting appears intentional. The 2% threshold in the Deer Solution franchise agreement is relatively low, meaning franchisees need to be particularly diligent in their financial reporting to avoid triggering an audit fee.
Prospective Deer Solution franchisees should carefully consider this audit provision and ensure they have systems in place to accurately track and report their financial performance. They may also want to inquire about the typical frequency and scope of audits conducted by Deer Solution to better understand the potential financial exposure.