Under what condition will a Kitchen Solvers franchisee be responsible for the cost of an audit?

According to Kitchen Solvers's 2025 Franchise Disclosure Document, under normal circumstances, audits and inspections are paid for by Kitchen Solvers. However, a Kitchen Solvers franchisee may be responsible for the cost of an audit under two specific conditions. First, if the audit is required because the franchisee failed to furnish required reports, financial statements, tax returns, or schedules as outlined in the Franchise Agreement, the franchisee will bear the audit costs. Second, if an audit reveals that the franchisee understated or underreported Gross Sales, Royalty Fees, Brand Fund Fees, or other amounts owed to Kitchen Solvers by more than 5%, the franchisee must reimburse Kitchen Solvers for the cost and out-of-pocket expenses of the audit. The estimated cost for an audit will vary based on the circumstances, but generally ranges from $500 to $2,000.

For a prospective Kitchen Solvers franchisee, this means maintaining accurate and timely financial records is crucial. Failure to do so can result in not only the expense of an audit but also potential penalties for underreporting sales or fees. The 5% threshold for underreporting is particularly important, as even unintentional errors exceeding this amount can trigger the cost reimbursement provision.

This type of clause is relatively common in franchise agreements. Franchisors need to ensure accurate reporting to calculate royalties and maintain brand consistency. By placing the cost burden on franchisees who fail to comply with reporting requirements or who underreport financial data, Kitchen Solvers incentivizes accurate and transparent financial practices among its franchisees. Franchisees should ensure they understand the reporting requirements and maintain meticulous records to avoid these potential costs.