What is the interest rate charged by Bhc on underpaid fees?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) Franchisor and its designated agents also have the right upon 10 days prior notice to examine, copy and audit the books and records relating to the BHC Restaurant and Master Franchisee's operation of the Franchised Business. If an examination or audit discloses any underpayment of any fee, Master 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 Master 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 Master 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 Master Franchisee's records for audit, Master Franchisee must reimburse Franchisor for the cost of having
Master 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 that a Master Franchisee has underpaid any fees, Bhc will charge interest on the deficient amount. This interest is calculated daily from the original due date until the payment is made. The annual percentage rate (APR) for this interest is 18%, but this rate may be lower if state law where the Master Franchised Bhc Restaurant is located sets a lower APR limit for delinquent payments.
This means that if a Master Franchisee makes an error in calculating and paying fees, they will not only be responsible for the underpaid amount but also for interest accruing daily at a potentially high rate. It is crucial for Master Franchisees to maintain accurate records and ensure timely and correct payments to avoid these interest charges. The daily calculation of interest means that the longer the underpayment goes unaddressed, the more the Master Franchisee will owe.
Furthermore, if the underpayment is 2% or more of the amount due, or if the audit was necessary due to the Master Franchisee's failure to provide required information promptly, the Master Franchisee must also reimburse Bhc for the cost of the audit. This additional cost can be significant, making it even more important for Master Franchisees to be diligent in their financial reporting and payments. This remedy is in addition to any other rights or remedies Bhc has under the agreement, including termination.
Prospective Master Franchisees should be aware of these financial obligations and ensure they have systems in place to accurately track and manage their payments to Bhc. Understanding the conditions under which interest and audit costs can be applied is essential for maintaining a healthy financial relationship with the franchisor and avoiding unexpected expenses.