What is the threshold for under-reporting gross revenues that constitutes a default for a Degree Wellness franchise?

According to Degree Wellness's 2025 Franchise Disclosure Document, under-reporting gross revenues by more than five percent constitutes a default under the franchise agreement. Specifically, if an audit or inspection reveals that a franchisee has under-reported gross revenues by an amount greater than 5%, it can trigger the default provisions outlined in the agreement. This threshold is important for prospective franchisees to understand, as it sets a clear standard for accurate financial reporting.

Under-reporting gross revenues can lead to serious consequences, including potential termination of the franchise agreement. Degree Wellness closely monitors franchisees' reported revenues through audits and inspections to ensure compliance. Franchisees must maintain accurate records and report their gross revenues honestly to avoid violating the agreement.

This provision is fairly standard in franchise agreements, as franchisors rely on accurate revenue reporting to calculate royalties and other fees. The 5% threshold provides a degree of tolerance for minor discrepancies but emphasizes the importance of truthful reporting. Degree Wellness franchisees should implement robust accounting practices to ensure they meet this requirement and avoid potential default.