What triggers the obligation for a Punch King Fitness franchisee to reimburse audit expenses?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
| Name of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Supplier Approval | Reimbursement of costs and expenses Franchisor incurs in approving a supplier | When applicable | If you want us to approve a supplier for the purchase of a designated product or service other than the supplier we designate, we may require that you reimburse us for the costs and expenses we incur in approving the supplier. |
| Step-In Right Expenses5 | Franchisor's personnel and administrative and travel costs, plus fifteen percent (15%) of that Gross Revenues | As incurred | If you are absent, ill, or unable to operate the Franchised Business or fail to pay taxes or required amounts, or the Franchised Business is having a significant negative impact on the Punch King Fitness System, we may step-in, and you must reimburse us our costs and expenses. |
| Audit | All costs of inspection and audit | Upon demand | You must reimburse us for audit expenses if the audit is initiated due to your non compliance with the terms herein or the Operating Manual or if an inspection reveals an understatement of Gross Revenues by 3% or more. |
| System Standard Violation | All costs of inspection and audit | Upon demand | If you fail to adhere to the System Standards, you must reimburse us for any and all costs and expenses associated with counsel, inspection, support, assistance, and enforcement rendered to and against Franchisee regarding said System Standards |
Source: Item 6 — OTHER FEES (FDD pages 10–16)
What This Means (2024 FDD)
According to Punch King Fitness's 2024 Franchise Disclosure Document, a franchisee may be required to reimburse Punch King Fitness for audit expenses under specific circumstances. These circumstances include if the audit is initiated due to the franchisee's non-compliance with the terms outlined in the Franchise Agreement or the Operating Manual.
Additionally, Punch King Fitness can require reimbursement for audit expenses if an inspection reveals an understatement of Gross Revenues by 3% or more. This means that if a franchisee's reported revenue is significantly lower than what is determined during an audit, the franchisee will be responsible for covering the costs of the audit.
This provision serves as a financial incentive for Punch King Fitness franchisees to adhere to the franchise agreement, comply with the operating manual, and accurately report their gross revenues. Franchisees should ensure they understand and follow all guidelines to avoid triggering an audit and the associated expenses.