What right does Bhc Franchisor have regarding inspections of the Master Franchisee's operations?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
maintain the required insurance coverage Franchisor may, but are not required to, procure insurance coverage on Master Franchisee's behalf and to charge the costs to Master Franchisee together with a reasonable fee for the expenses Franchisor incurs.
8.10 Review and Inspection.
- (a) Franchisor has the right to send representatives at reasonable intervals at any time (announced or unannounced) during normal business hours to Master Franchised BHC Restaurant (or any other facility from which Master Franchisee sells BHC Products or any other offices relating to Master Franchisee's operation of the BHC Restaurant or conduct of the Franchised Business) to review and inspect Master Franchisee's operations, business methods, service, management and administration at the BHC Restaurant or relating to the Franchised Business, to determine the quality thereof and the faithfulness of Master Franchisee's compliance with the provisions of this Agreement and the Operations Manual and to ensure Master Franchisee is in compliance with System standards prescribed by Franchisor.
- (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).
(c) Master Franchisee must, and ensure Subfranchisees, fully cooperate in permitting Franchisor's representatives to access Master Franchised BHC Restaurant (or any other facility from which Master Franchisee sells BHC Products or any other offices relating to Master Franchisee's conduct of the Master Franchise Business) during normal business hours to conduct reviews and inspections, and to render such assistance as Franchisor's representatives may reasonably request. Upon notice from Franchisor or Franchisor's representatives, Master Franchisee must immediately begin such steps as may be necessary to correct any deficiencies noted during any such inspection. Franchisor's representatives may re-inspect Master Franchised BHC Restaurant (or other facility, if applicable) to ensure noted deficiencies have been corrected. If the deficiencies have not been corrected by the time of the initial reinspection, Franchisor's representatives may make additional re-inspections thereafter until noted deficiencies have been corrected or deem the Master Franchisee to be in material breach. Master Franchisee shall be responsible for all accommodation, transportation, meals, daily allowances, and other costs and expenses for the Franchisor's personnel in connection with such re-inspections.
8.11 Compliance with Laws.
- (a) Master Franchisee must, and ensure Subfranchisees, always (i) operate the BHC Restaurant and the Franchised Business in compliance with all applicable laws, rules, and regulations of applicable government authorities, (ii) comply with all applicable wage, hour and other laws and regulations of federal, state, or local governments, (iii) prepare and file all necessary tax returns, and (iv) pay promptly all taxes imposed upon Master Franchisee or upon Master Franchisee's business or property.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, Bhc retains the right to inspect a Master Franchisee's operations. Bhc can send representatives to inspect the Master Franchised Bhc Restaurant, or any other facilities from which the Master Franchisee sells Bhc products, at reasonable intervals, either announced or unannounced, during normal business hours. These inspections are to review the Master Franchisee's operations, business methods, service, management, and administration to ensure quality and compliance with the Franchise Agreement and Operations Manual, and to verify compliance with Bhc's System standards.
Bhc also has the right to examine, copy, and audit the books and records related to the Bhc Restaurant and the Master Franchisee's operation of the Franchised Business, provided they give 10 days prior notice. If an audit reveals any underpayment of fees, the Master Franchisee must promptly pay the deficient amount plus interest, calculated daily at an APR of 18%, unless state law limits interest rates to a lower APR.
Furthermore, if the underpayment or understatement is 2% or more, or if the audit is necessitated by the Master Franchisee's failure to provide required information in a timely manner, or if assembling the Master Franchisee's records takes an unreasonable amount of time (more than eight hours), the Master Franchisee must reimburse Bhc for the cost of the audit. The Master Franchisee is also required to ensure Subfranchisees fully cooperate with Bhc representatives during reviews and inspections. The Master Franchisee is responsible for correcting any deficiencies noted during inspections and will bear the costs of re-inspections, including accommodation, transportation, meals, and daily allowances for Bhc's personnel, up to three times per Franchised Bhc Restaurant. Bhc also has the right to regularly inspect the Master Franchised Bhc Restaurant and any other site where the Master Franchisee conducts the Franchised Business.