What actions must the Bath Tune Up franchisee take if Gross Revenue is understated by 5% or more?
Bath_Tune_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
Further, if such audit or inspection is made necessary by the failure of Franchisee to furnish Documents as herein required, or if it is determined by any such audit or inspection that Franchisee's records and procedures were insufficient to permit a proper determination of Gross Revenue or Product purchases for any year or part thereof to be made, or that Gross Revenue, Continuing Royalty or other material financial information for the period in question were understated by 5% or more of the Gross Revenue actually received, Franchisee shall immediately take such steps as may be necessary to remedy such default in accordance with any Franchisor requirement and Franchisee shall promptly pay to Franchisor all costs incurred in connection with such audit or inspection, including, without limitation, charges of an accountant and the travel expenses, room, board and compensation of employees of Franchisor or its designee who performed the audit or inspection.
In the event any audit or inspection reveals any understatement of 5% or more of Gross Revenue, Franchisor has the right as it deems necessary to conduct further audits or inspections for up to two years thereafter, at Franchisee's expense for all costs and expenses of the subsequent audit or inspection.
Franchisee acknowledges and agrees that if a subsequent audit or inspection reveals any understatement of Gross Revenues of 5% or more, in addition to any other available remedies, Franchisor will have the right to terminate this Agreement without any opportunity to cure in accordance with Section 10.2 of this Agreement.
If Franchisee's records and procedures were insufficient to permit a proper determination of Gross Revenue or Product purchases, Franchisor shall have the right to deliver to Franchisee an estimate, made by Franchisor, of Gross Sales or Product purchases from other than approved vendors for the period under consideration and Franchisee shall immediately pay to Franchisor any amount shown thereby to be owing on account of the Continuing Royalty and other sums due on account of any understatement and, as liquidated damages and not a penalty, such sums that would otherwise have been paid to Franchisor by approved vendors in the form of rebate had Franchisee purchased Product from the approved vendors instead of unapproved vendors.
Any such estimate shall be final and binding on
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2025 FDD)
According to Bath Tune Up's 2025 Franchise Disclosure Document, if an audit or inspection reveals that a franchisee's Gross Revenue, Continuing Royalty, or other material financial information was understated by 5% or more of the actual Gross Revenue received, the franchisee must take immediate action to correct the default according to Bath Tune Up's requirements. Additionally, the franchisee is responsible for promptly paying all costs associated with the audit or inspection. These costs include charges from an accountant, as well as travel expenses, room, board, and compensation for Bath Tune Up employees or designees who conducted the audit or inspection.
Bath Tune Up also has the right to conduct further audits or inspections for up to two years following the initial audit, at the franchisee's expense, if the initial audit reveals an understatement of 5% or more of Gross Revenue. If a subsequent audit or inspection reveals another understatement of Gross Revenues of 5% or more, Bath Tune Up has the right to terminate the Franchise Agreement without any opportunity for the franchisee to correct the issue.
Furthermore, if the franchisee's records and procedures are insufficient to accurately determine Gross Revenue or Product purchases, Bath Tune Up can deliver an estimate of Gross Sales or Product purchases from unapproved vendors. The franchisee must then immediately pay any amount shown to be owing on account of the Continuing Royalty and other sums due on account of any understatement. The franchisee will also be required to pay, as liquidated damages and not a penalty, such sums that would otherwise have been paid to Bath Tune Up by approved vendors in the form of a rebate had the franchisee purchased Product from the approved vendors instead of unapproved vendors. Any such estimate made by Bath Tune Up is considered final and binding on the franchisee.