What is the financial threshold for underreported amounts that triggers a Mr. Sandless franchisee's obligation to reimburse audit costs?

According to Mr. Sandless's 2025 Franchise Disclosure Document, a franchisee may be responsible for covering the costs of an audit if they underreport their gross sales by a certain percentage. Specifically, if an audit reveals that a Mr. Sandless franchisee has underreported any amounts by two percent (2%) or more during any period, they will be required to reimburse Mr. Sandless for the cost of the audit. This reimbursement covers charges from independent certified public accountants, attorney's fees, other legal costs, and the travel expenses, room, board, and compensation of Mr. Sandless's employees.

This policy serves as a financial incentive for Mr. Sandless franchisees to accurately report their gross sales. Franchisees should maintain meticulous records and ensure accurate reporting to avoid triggering an audit and the potential for incurring these additional costs. The audit can be initiated at Mr. Sandless's discretion, so franchisees should prioritize compliance with reporting requirements.

The obligation to cover audit costs is in addition to paying any outstanding Royalty Fees, Advertising Fees, and other sums due to Mr. Sandless, along with interest on those amounts. This cumulative financial burden underscores the importance of accurate financial reporting and adherence to the franchise agreement. Franchisees should consult with financial professionals to ensure compliance and avoid potential penalties.