Under what circumstances must a Bhc Master Franchisee reimburse the Franchisor for the cost of an examination or audit?
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
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, a Master Franchisee may be required to reimburse Bhc for the cost of an examination or audit of their books and records under specific circumstances. This reimbursement is required if the audit reveals an underpayment or understatement of any amount due to Bhc by 2% or more. This condition ensures that Bhc can recover expenses incurred when significant discrepancies are found in the Master Franchisee's financial reporting.
Additionally, reimbursement is required if the audit is necessitated by the Master Franchisee's failure to provide necessary information or documents to Bhc in a timely manner. This provision is in place to discourage delays or omissions in providing financial data, which can impede the auditing process. The requirement for timely information ensures that Bhc can efficiently conduct its audits without unnecessary delays caused by the Master Franchisee's non-compliance.
Finally, a Master Franchisee must reimburse Bhc if the franchisor's auditors spend an unreasonable amount of time, defined as more than eight hours, assembling the Master Franchisee's records for the audit. This condition is designed to prevent Master Franchisees from maintaining disorganized or incomplete records, which could prolong the audit process and increase costs for Bhc. This remedy is in addition to any other rights or remedies Bhc has under the agreement, including the right to terminate the agreement.