Under what conditions will a Dq Treat licensee be required to reimburse the company for audit costs?
Dq_Treat Franchise · 2025 FDDAnswer from 2025 FDD Document
- (C) Understatement of Gross Sales. In addition to any other rights Company may have, if any audit reveals that the Restaurant's Gross Sales have been understated by 3% or more, Licensee must reimburse Company for all costs of the audit, including salaries, outside accountant fees, outside attorneys' fees, copying costs, postage, travel, meals, and lodging ("audit costs"), and for all audit costs incurred in connection any additional periodic on-site or off-site audits of the Business Records that Company reasonably deems necessary for up to 2 years after the initial audit. Upon Company's request, Licensee must submit tax returns for all Owners to Company. If Licensee intentionally understates or underreports Gross Sales, continuing license fees, or sales promotion program fees, or if an additional audit conducted within the 2-year period reveals an understatement or variance of 3% or more, in addition to any other remedies provided for in this agreement, at law or in equity, Company may terminate this agreement in accordance with section 13.2(C).
Source: Item 17 — The following paragraph is added to the end of Item 17 of the Disclosure Document: (FDD pages 70–378)
What This Means (2025 FDD)
According to Dq Treat's 2025 Franchise Disclosure Document, a licensee will be required to reimburse the company for audit costs if an audit reveals that the restaurant's gross sales have been understated by 3% or more. This reimbursement covers all expenses incurred by Dq Treat during the audit, including salaries, outside accountant and attorney fees, copying costs, postage, travel, meals, and lodging.
This requirement extends beyond the initial audit. If the initial audit reveals an understatement of 3% or more, Dq Treat can conduct additional periodic on-site or off-site audits of the business records for up to two years. The licensee is responsible for all audit costs associated with these additional audits as well. Furthermore, Dq Treat may request tax returns for all owners to verify the information provided in the business records.
If a Dq Treat licensee intentionally understates or underreports gross sales, continuing license fees, or sales promotion program fees, or if a subsequent audit within the two-year period reveals an understatement or variance of 3% or more, Dq Treat has the right to terminate the agreement. This provision underscores the importance of accurate financial reporting and the potential consequences of non-compliance for Dq Treat franchisees.