Under what conditions must a franchisee reimburse Exit Realty Upper Midwest for the cost of an audit?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Note 7 If an audit reveals that you have underpaid amounts owing under your Franchise Agreement, and the underpayment is willful or exceeds five percent (5%) of the amount actually owing, in addition to paying the full amount owing, you must reimburse EXIT Realty Upper Midwest for the cost of the audit, including travel, lodging, meals, professional fees, salaries and other expenses of the persons conducting the audit. The expenses relating to the audit are nonrefundable.
Source: Item 6 — OTHER FEES (FDD pages 13–15)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, a franchisee may be required to reimburse Exit Realty Upper Midwest for the cost of an audit under specific circumstances. If an audit reveals that the franchisee has underpaid amounts owed under the Franchise Agreement, the franchisee will be responsible for covering the audit costs if the underpayment was willful or exceeds five percent (5%) of the actual amount owed.
The reimbursement covers all expenses associated with the audit, including travel, lodging, meals, professional fees, salaries, and other expenses incurred by the individuals conducting the audit. It is important to note that these audit-related expenses are nonrefundable, regardless of the audit's outcome.
This provision serves as a deterrent against underreporting revenues and ensures that Exit can recover expenses incurred when franchisees fail to meet their financial obligations accurately. Prospective franchisees should understand this clause and maintain accurate financial records to avoid triggering an audit and potential reimbursement of audit costs.