Under what circumstances, beyond the standard retention period, must a Benihana franchisee continue to retain books and records?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
All books and records relating to operation of the Restaurant shall be maintained at the Restaurant or, with BNC's prior written consent, at Franchisee's main offices.
- 8.5 BNC or its authorized representative at all reasonable times shall have the right to inspect, audit, photocopy and/or examine all of Franchisee's books, records and tax returns, including without limitation, Franchisee's general ledger, its balance sheets, its profit and loss statements and its stockholder's registry book.
BNC shall also have the right, at any time, to have an independent audit made of Franchisee's books and records.
If any inspection, review or audit reveals that Franchisee understated any payments in any report submitted to BNC, then BNC shall have the right to immediately debit from Franchisee's bank account or require Franchisee to immediately pay the amount understated to BNC, as well as interest from the date such amount was due until debited or paid, at the rate of 18% per annum, or the maximum rate permitted by law, whichever is less.
If an inspection, review or audit discloses an understatement in any report of 3% or more, BNC may, in addition to repayment of monies owed with interest, debit from Franchisee's bank account or require Franchisee to reimburse BNC for any and all costs and expenses incurred by BNC in connection with the inspection, review or audit, including, without limitation, travel, lodging, wages and reasonable accounting and legal costs.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
Based on the 2024 Franchise Disclosure Document, Benihana franchisees are required to maintain all books and records related to the operation of their restaurant. These records must be kept either at the restaurant location or, with prior written consent from Benihana, at the franchisee's main offices. Benihana retains the right to inspect, audit, photocopy, and examine these records at any reasonable time. This includes access to the franchisee's general ledger, balance sheets, profit and loss statements, and stockholder's registry book. Benihana also has the right to conduct independent audits of the franchisee's books and records.
If an inspection, review, or audit reveals that a Benihana franchisee has understated any payments in their reports to Benihana, the franchisee is obligated to pay the understated amount immediately. Additionally, interest will be charged from the date the amount was due until it is paid, at a rate of 18% per annum, or the maximum rate permitted by law, whichever is less. If the understatement in any report is 3% or more, Benihana may require the franchisee to reimburse Benihana for all costs and expenses incurred during the inspection, review, or audit. This includes travel, lodging, wages, and reasonable accounting and legal costs.
The FDD does not specify a standard retention period for these records. It also does not explicitly state under what specific circumstances, beyond a standard retention period, a Benihana franchisee must continue to retain these books and records. A prospective franchisee should seek clarification from Benihana regarding the standard retention period for financial records and the specific conditions that would necessitate retaining records beyond this period. This information is crucial for ensuring compliance and avoiding potential disputes or penalties.