Are there any disclaimers related to the Beehive Homes financial statements?
Beehive_Homes Franchise · 2025 FDDAnswer from 2025 FDD Document
Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Bee Hive Homes, Inc.'s internal control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Bee Hive Homes, Inc.'s ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 34)
What This Means (2025 FDD)
According to Beehive Homes' 2025 Franchise Disclosure Document, several disclaimers and qualifications pertain to the financial statements and financial performance representations. The Independent Auditor's Report states that the audit was conducted according to Generally Accepted Auditing Standards (GAAS) to provide reasonable assurance that the financial statements are free from material misstatement. However, it clarifies that reasonable assurance is not absolute and doesn't guarantee the detection of all material misstatements, especially those resulting from fraud. This indicates that while the financial statements are audited, there's an inherent risk that some misstatements may not be detected.
Furthermore, the financial performance representations are based on historical data from a subset of Beehive Homes franchises. For example, revenue figures for 2022 were based on responses from 104 out of 198 franchises, and for 2023, 106 out of 198 franchises. The FDD explicitly states that the results achieved by the reporting franchises may not be typical for a new franchisee's location, particularly if the location is in a different type of area (urban vs. suburban). It also notes that each of the franchises reporting revenue data has been in business for at least two years, implying that new franchises may not perform similarly in their initial years.
Beehive Homes also includes a general disclaimer regarding financial performance. It states that a new franchisee's individual financial results may differ from those stated in the financial performance representation. The FDD emphasizes that there is no assurance that a franchisee will achieve similar results, and if a prospective franchisee relies on the provided figures, they must accept the risk of not performing as well. This is a standard disclaimer in franchise FDDs, highlighting that past performance is not necessarily indicative of future results and that individual success depends on various factors, including the franchisee's efforts and local market conditions.
Finally, the FDD notes that written substantiation for the financial performance representations will be made available to the prospective franchisee upon reasonable request. This means that a potential franchisee can ask for the underlying documentation supporting the revenue figures presented, allowing them to conduct further due diligence. This is a valuable right for prospective franchisees, enabling them to verify the franchisor's claims and make a more informed investment decision.