Under what condition is a Deer Solution franchisee subject to an Audit fee?
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 subject to an audit fee if a financial audit determines underreporting of 2% or greater during any designated audit period. This audit fee covers costs incurred by Deer Solution, including audit, legal, travel, and reasonable accommodations. The audit fee is payable on demand.
This means that Deer Solution has the right to audit a franchisee's financial records if they suspect underreporting of gross sales or other financial discrepancies. If the audit confirms that the franchisee has underreported by 2% or more during the audit period, the franchisee will be responsible for covering the costs of the audit itself, as well as any associated legal and travel expenses incurred by Deer Solution.
Franchisees should maintain accurate and transparent financial records to avoid triggering an audit and potentially incurring these fees. It is important to understand what constitutes "Gross Sales" as defined in Note 3 of Item 6, which includes "the total dollar sales from all business and customers" with specific inclusions and exclusions. Franchisees should also ensure they are submitting Royalty and Activity Reports, and other financial statements as required under the Franchise Agreement to avoid additional Reporting Non-Compliance fees of $150 per occurrence.