What interest rate will be applied to past due amounts owed to Bhc?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
If an examination or audit discloses any underpayment of any fee, Franchisee must promptly pay the deficient amount plus interest calculated daily from the due date until paid at an APR of 18% (unless interest rates on delinquent payments in the state in which Franchisee's Franchised BHC Restaurant is located are limited by law to a lower APR, in which case that lower APR will apply).
If an examination or audit discloses an underpayment or understatement of any amount due Franchisor by 2% or more, or if the examination or audit is made necessary by Franchisee's failure to furnish required information or documents to Franchisor in a timely manner, or it takes Franchisor's auditors an unreasonable amount of time (more than eight hours) to assemble Franchisee's records for audit, Franchisee must reimburse Franchisor for the cost of having Franchisee's books and records examined or audited (this remedy will be in addition to any other rights or remedies Franchisor has under this Agreement or otherwise, including Franchisor's right to terminate this Agreement).
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, if an audit reveals any underpayment of fees, the franchisee must pay the deficient amount along with interest. This interest is calculated daily from the due date until it is paid. The annual percentage rate (APR) for this interest is 18%, unless the interest rates on delinquent payments are legally limited to a lower APR in the state where the Bhc restaurant is located; in that case, the lower APR will be applied.
This means that if a Bhc franchisee underpays any fees, they will be charged interest on the underpaid amount until it is fully paid. The 18% APR could significantly increase the amount owed, so franchisees must ensure accurate and timely payments. The clause allowing for a lower APR based on state law protects franchisees from potentially excessive interest charges in states with stricter regulations.
Furthermore, if the underpayment or understatement is 2% or more, or if the audit is necessitated by the franchisee's failure to provide required information promptly, or if assembling the franchisee's records for audit takes an unreasonable amount of time (more than eight hours), the franchisee must also reimburse Bhc for the cost of the audit. This provision incentivizes franchisees to maintain accurate records and cooperate fully with audits to avoid additional expenses.
In summary, Bhc franchisees need to be diligent in their financial reporting and payments to avoid interest charges and potential audit costs. Understanding the conditions under which interest and audit fees can be applied is crucial for managing the financial obligations of the franchise.