If a Deka Lash franchisee understates revenue, what costs are included in the audit reimbursement?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
Audits will be conducted at our expense unless you understate the Gross Revenue for any reported period or period by more than 2% or if you fail to deliver any required report.
In the event of an understatement or failure to deliver, you will reimburse us for all audit costs.
These will include, among other things, the charges of any independent accountant and the travel expenses, room, board, and compensation of our employees incurred in connection with the audit.
You will immediately pay all Royalty Fees, Brand Development Fees, late payment charges and interest on funds that the audit determines are owed.
Our right to audit will include the right to examine the books, tax returns and records of you and other
Source: Item 23 — RECEIPT (FDD pages 63–234)
What This Means (2024 FDD)
According to Deka Lash's 2024 Franchise Disclosure Document, if a franchisee understates gross revenue by more than 2% for any reported period, or fails to deliver a required report, they will be responsible for reimbursing Deka Lash for all audit costs. These costs encompass several specific items.
The audit reimbursement includes charges from any independent accountant Deka Lash hires to conduct the audit. Additionally, the franchisee must cover the travel expenses for Deka Lash's employees involved in the audit, including their room and board. The reimbursement also extends to the compensation of Deka Lash's employees for the time they spend conducting the audit.
Furthermore, the FDD states that the franchisee is obligated to immediately pay any Royalty Fees, Brand Development Fees, late payment charges, and interest on funds that the audit determines are owed. This means that in addition to covering the direct costs of the audit, the franchisee must also rectify any underpayments of fees or charges that the audit reveals. Deka Lash also retains the right to examine the books, tax returns, and records of other businesses the franchisee owns or operates to ensure all revenue has been properly reported and that appropriate fees and contributions have been paid.