What is the interest rate charged by Bhc on underpaid fees discovered during an audit?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
If an examination or audit discloses any underpayment of any fee, you 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 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 us by 2% or more, or if the examination or audit is made necessary by your failure to furnish required information or documents to us in a timely manner, or it takes our auditors an unreasonable amount of time (more than eight hours) to assemble your records for audit, you must reimburse us for the cost of having your books and records examined or audited (this remedy will be in addition to any other rights or remedies we have under this Agreement or otherwise, including our right to terminate the Franchise Agreement).
Source: Item 6 — Other Fees (FDD pages 12–18)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, if an audit reveals that a 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%, unless the state where the franchisee's Bhc restaurant is located has laws that limit interest rates on delinquent payments to a lower APR. In that case, the lower APR will be applied. This means a franchisee could face a significant financial penalty for underreporting revenue or miscalculating fees, especially if the underpayment continues for an extended period.
In addition to interest on the underpaid amount, Bhc may also require the franchisee to cover the costs of the audit itself under certain conditions. Specifically, if the audit reveals an underpayment or understatement of any amount due to Bhc by 2% or more, or if the audit was necessary because the franchisee failed to provide required information or documents in a timely manner, or if the franchisee's records take an unreasonable amount of time (more than eight hours) to assemble for the audit, the franchisee must reimburse Bhc for the cost of the audit. This is in addition to any other remedies Bhc has under the Franchise Agreement, including the right to terminate the agreement.
Prospective franchisees should be aware of these potential costs and ensure they have robust accounting practices in place to accurately track and report all revenue and fees. They should also familiarize themselves with the specific laws in their state regarding interest rate limits on delinquent payments to understand the potential maximum interest rate Bhc could charge. Maintaining accurate records and promptly addressing any discrepancies can help franchisees avoid these additional expenses and maintain a positive relationship with Bhc.