Under what conditions must a Bhc Franchisee reimburse the Franchisor for the cost of an audit?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
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 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 Franchisee's records for audit, Franchisee must reimburse Franchisor for the cost of having 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, a franchisee may be required to reimburse Bhc for the cost of an audit under specific circumstances. These circumstances include situations where an audit reveals an underpayment or understatement of any amount due to Bhc by 2% or more.
Additionally, if the audit is necessitated by the franchisee's failure to provide required information or documents to Bhc in a timely manner, the franchisee may be responsible for covering the audit expenses. Another trigger for reimbursement is if the franchisee's records are disorganized, causing the audit to take an unreasonable amount of time, specifically more than eight hours, for Bhc's auditors to assemble.
This reimbursement requirement is in addition to any other remedies Bhc may have under the Franchise Agreement or otherwise, including the right to terminate the agreement. This provision encourages franchisees to maintain accurate financial records and provide necessary information promptly to avoid potential audit costs and other penalties.
Prospective Bhc franchisees should be aware of these conditions and ensure they have systems in place to maintain accurate records and meet reporting deadlines to avoid incurring audit costs. Understanding these financial obligations is crucial for managing the overall cost of operating a Bhc franchise.