Audit fee
What it means
Because royalties are usually a percentage of sales, franchisors reserve the right to audit a franchisee's reported figures. Many agreements make the franchisee pay the cost of the audit in defined circumstances, commonly where the audit uncovers under-reporting above a threshold.
It is one of several less-obvious fees that can appear in a franchise agreement beyond the headline royalty and marketing levy. Knowing it exists helps you avoid surprises and report accurately.
In practice
Check the audit clause for when an audit fee applies and what threshold triggers you paying. Accurate, timely sales reporting is the simplest way to ensure an audit never costs you.
A real example
A franchise agreement states that if an audit finds reported sales understated by more than 2%, the franchisee pays the audit cost. A café franchisee who reports accurately never incurs it.
Audit fee, FAQs
What is an audit fee in a franchise agreement?
A fee the franchisee may have to pay for the cost of a franchisor audit, typically when the audit finds sales or records were under-reported beyond a set threshold.
How do I avoid paying an audit fee?
Report sales accurately and on time. Audit fees usually apply only where an audit uncovers under-reporting, so clean reporting avoids the trigger.
See the full franchise glossary, the Fee Index or our buyer guides.