What financial threshold triggers immediate termination for understatement of financial information in Kitchen Solvers audits?
Kitchen_Solvers Franchise · 2025 FDDAnswer from 2025 FDD Document
We or our authorized representative have the right at all times during the business day to enter the premises where your books and records relative to your Business are kept and to evaluate, copy and audit such books and records. In the event that any such evaluation or audit reveals an understatement of your Gross Sales, Royalty Fee or other material financial information related to your Business of 5% or more from data reported to us, in addition to any other rights we may have (including collection of amounts owed with respect to any understatement), you must reimburse us for all audit costs including, without limitation, the related professional fees, travel, and room and board expenses. Furthermore, we may conduct further periodic audits and/or evaluations of your books and records, at your sole expense, as we reasonably deems necessary for up to two years thereafter. You acknowledge and agree that if a subsequent audit or evaluation conducted within the two year period reveals any such understatement or variance of 5% or more, in addition to any other remedies provided for in this Agreement, at law or in equity, we will have the right to terminate this Agreement in accordance with Subparagraph 11.B of this Agreement.
Source: Item 22 — Contracts (FDD page 49)
What This Means (2025 FDD)
According to Kitchen Solvers' 2025 Franchise Disclosure Document, if an audit reveals that a franchisee has understated their Gross Sales, Royalty Fee, or other material financial information by 5% or more, Kitchen Solvers has grounds for immediate termination. This is in addition to any other rights Kitchen Solvers may have, such as collecting the amounts owed due to the understatement.
This policy means that Kitchen Solvers franchisees must ensure accurate financial reporting. Underreporting income, even unintentionally, by 5% or more can lead to the termination of the franchise agreement. This threshold applies not only to Gross Sales and Royalty Fees but also to any other material financial information related to the business.
Furthermore, if an initial audit reveals an understatement of 5% or more, Kitchen Solvers may conduct additional periodic audits at the franchisee's expense for up to two years. If a subsequent audit within this period also reveals an understatement or variance of 5% or more, Kitchen Solvers has the right to terminate the agreement. This highlights the importance of maintaining accurate and transparent financial records to avoid potential penalties and termination.