What happens if a Gokhale Method franchisee underreports revenue by more than 2 percent?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
We have not audited any franchisees to date and do not know the cost that would be incurred by a franchisee who had under-reported revenue.
Under the franchise agreement, if a franchisee underreports revenue in an amount in excess of 2 percent, the franchisee must pay the costs of the audit, which include the fees of the auditors, travel, meals and lodging for them and any other costs incurred with obtaining and performing the audit.
Based upon our current knowledge of auditors' hourly rates, and depending upon the time required for the audit and whether travel to your place of business would be necessary, the audit cost could range from several hundred dollars to several thousand dollars.
Source: Item 6 — OTHER FEES (FDD pages 11–13)
What This Means (2024 FDD)
According to Gokhale Method's 2024 Franchise Disclosure Document, if a franchisee underreports revenue by more than 2 percent, they will be responsible for covering the costs of an audit. These costs encompass the fees for the auditors, their travel expenses, meals, lodging, and any other expenses incurred during the audit process.
The FDD indicates that Gokhale Method has not yet conducted any audits of franchisees, so the exact cost is not known. However, the document estimates that audit costs could range from several hundred to several thousand dollars, depending on the auditor's hourly rates, the time required for the audit, and whether travel to the franchisee's location is necessary.
This provision means that prospective Gokhale Method franchisees should ensure accurate and transparent financial reporting to avoid potential audit expenses. Franchisees should maintain meticulous records and consult with financial professionals to ensure compliance with reporting requirements. The risk of incurring substantial audit costs serves as an incentive for franchisees to maintain accurate financial records and adhere to the franchisor's reporting guidelines.