What constitutes an understatement that triggers reimbursement of audit costs to Engineering For Kids?
Engineering_For_Kids Franchise · 2025 FDDAnswer from 2025 FDD Document
If an inspection or audit discloses an understatement of 2% or more for any given month, or that you were offering unapproved programs or using unapproved curriculum, then you must also reimburse us for all costs and expenses, including accounting and attorney's fees, connected with the inspection or audit. The amount of audit costs will be determined by the auditors, legal advisors and other professionals who provide the audit services. These costs will vary based on the fees charged by these professionals, travel
- costs, the scope of the audit needed, the degree to which you cooperate in terms of providing information, the time it takes the auditors to review your records, and inflation.
Source: Item 6 — OTHER FEES (FDD pages 10–15)
What This Means (2025 FDD)
According to Engineering For Kids' 2025 Franchise Disclosure Document, if an audit reveals that a franchisee has understated payments due to Engineering For Kids by 2% or more for any given month, or if the franchisee was offering unapproved programs or using unapproved curriculum, the franchisee must reimburse Engineering For Kids for all costs and expenses associated with the audit. These costs include accounting and attorney's fees.
The amount of these audit costs can vary significantly. The FDD specifies that the fees charged by auditors, legal advisors, and other professionals, as well as travel costs, the scope of the audit, the franchisee's cooperation in providing information, the time it takes to review records, and inflation all affect the total cost.
This policy means that franchisees must maintain accurate financial records and adhere strictly to Engineering For Kids' approved programs and curriculum. Failure to do so not only results in paying the understated amount plus interest but also potentially covering substantial audit-related expenses. This could create a significant financial burden for the franchisee, especially if inaccuracies or unauthorized activities occur.