Under what circumstances is an Itan franchisee required to reimburse Itan for the cost of an audit?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
We may audit your books and records at any time. You must fully cooperate with us and any Person we hire to conduct the audit. If an audit reveals an understatement of Gross Sales, you must immediately pay us all additional fees you owe together with any late fee imposed pursuant to §13.4. You must reimburse us for the cost of any audit (including reasonable accounting and attorneys' fees and Travel Expenses incurred by us or the auditor) that: (a) is required due to your failure to provide information we request, preserve records or file reports as required by this Agreement; or (b) reveals an understatement of Gross Sales by at least 3%. We bear the cost of all other audits. Your reimbursement of our audit costs does not preclude us from terminating this Agreement.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, an Itan franchisee may have to reimburse Itan for the cost of an audit under specific circumstances. These costs can include accounting and attorney's fees, as well as travel expenses incurred by Itan or the auditor.
Specifically, Itan will require the franchisee to cover the audit costs if the audit was necessary because the franchisee failed to provide requested information, preserve required records, or file necessary reports. Additionally, if an audit reveals that the franchisee understated their Gross Sales by at least 3%, they will be responsible for reimbursing Itan for the audit expenses.
It is important to note that the franchisee's responsibility to cover audit costs does not prevent Itan from terminating the Franchise Agreement. Itan bears the cost of all other audits that do not fall under these specific circumstances. This policy incentivizes franchisees to maintain accurate records and cooperate fully with Itan's requests for information to avoid potential audit costs.