Under what circumstances must a Bhc franchisee reimburse Bhc for the cost of an audit?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
R, 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).
- (7) Not later than ten (10) business days after our request, you must submit to us financial or statistical reports, records, statements, or information as required in the Operations Manual or otherwise by us in writing. All financial or statistical information you provide to us must be accurate and correct in all material respects. Within 90 days after the end of each of your fiscal years (or any permitted extension for filing same), you must submit to Franchisor a copy of the Schedule C (Form 1040 Profit or Loss From Business) or equivalent portion of your federal tax return that relates to the Master Franchised BHC Restaurant and your operation of the Business.
- (8) Insurance includes all risk or all peril coverage, business interruption insurance, comprehensive general liability insurance and other forms of insurance we require. You pay insurance merchandise directly to our required third-party insurer. You must deliver to us upon commencing leasehold improvement of your Master Franchised BHC Restaurant, and thereafter annually or at our request, a proper certificate evidencing the existence of the required insurance coverage. Such insurance certificate must contain a statement to the effect the certificate cannot be canceled without 30 days prior written notice to you and us.
Source: Item 6 — Other Fees (FDD pages 12–18)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, a franchisee may be required to reimburse Bhc for the cost of an audit under specific circumstances. Bhc has the right to examine and audit a franchisee's books and records with 10 days prior notice.
If an audit reveals an underpayment or understatement of any amount due to Bhc by 2% or more, the franchisee is responsible for reimbursing Bhc for the audit costs. Additionally, if the audit is necessitated by the franchisee's failure to provide required information or documents in a timely manner, reimbursement is required. Finally, if it takes Bhc's auditors an unreasonable amount of time (defined as more than eight hours) to assemble the franchisee's records for the audit, the franchisee must cover the audit expenses.
The FDD also specifies an 'Audit' fee ranging from $10,000 to $20,000, payable upon receipt of an invoice, if a franchisee fails to provide monthly financial statements or if a random audit reveals an understatement of Gross Revenue exceeding 2%. This fee appears to be separate from the reimbursement of audit costs triggered by the conditions mentioned above, suggesting franchisees could face audit fees in addition to reimbursements under certain circumstances.