Under what condition is a Jersey Mikes franchisee required to pay for an audit?
Jersey_Mikes Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Audit7 | Cost of audit plus interest on underpayment | 30 days after billing | Payable only if audit of Company shows that you understated Gross Receipts by at least 2%. |
Source: Item 6 — OTHER FEES (FDD pages 15–24)
What This Means (2025 FDD)
According to Jersey Mike's 2025 Franchise Disclosure Document, a franchisee is required to cover the cost of an audit, along with interest on any underpayment, if an audit conducted by Jersey Mike's reveals that the franchisee has understated their Gross Receipts by at least 2%. The payment for the audit and interest is due 30 days after billing.
Jersey Mike's, or its designated agents, has the right to inspect a franchisee's books, records, and tax returns at reasonable times, and may also conduct an independent audit at the company's expense. If discrepancies are found, the franchisee must immediately pay the owed amounts, along with interest.
This policy is fairly standard in franchising, as it ensures accurate reporting of revenue, which directly impacts royalty and advertising fee payments. The 2% threshold provides a reasonable buffer, focusing the cost burden on franchisees with significant underreporting rather than minor discrepancies. Prospective franchisees should maintain meticulous records to avoid triggering an audit and potential expenses.