Under what conditions will Bhc require a franchisee to reimburse the cost of an examination or audit of their books and records?
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, a franchisee may be required to reimburse Bhc for the cost of an examination or audit of their books and records under specific circumstances. Bhc has the right to examine and audit a franchisee's books and records with 10 days prior notice.
Specifically, Bhc will require reimbursement if an audit reveals an underpayment or understatement of any amount due to Bhc by 2% or more. Reimbursement will also be required if the audit is necessitated by the franchisee's failure to provide required information or documents to Bhc in a timely manner. Additionally, 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 will be responsible for covering the audit costs.
This provision is in addition to any other rights or remedies Bhc has under the Franchise Agreement, including the right to terminate the agreement. The FDD also specifies that a franchisee will pay Bhc between $10,000 and $20,000 for an audit if they fail to provide monthly financial statements, or if a random audit shows an understatement of Gross Revenue in excess of 2%.