Are the financial statements for Black Bear Diner audited or unaudited?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
The company-affiliated Restaurant information is derived from our internal accounting records and is unaudited. The franchised Restaurant sales information in the table is derived from our franchisee's sales reports, and is unaudited and unverified. You should conduct an independent investigation of the costs and expenses you will incur in operating your Restaurant. Current franchisees or former franchisees listed in Exhibits F and G of this Disclosure Document may be one source of information.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 55)
What This Means (2025 FDD)
According to Black Bear Diner's 2025 Franchise Disclosure Document, the financial performance representation for company-affiliated restaurants is derived from internal accounting records and is unaudited. Similarly, the franchised restaurant sales information is derived from franchisees' sales reports, which are also unaudited and unverified. This means that the franchisor, Black Bear Diner, has not had an independent accounting firm verify the accuracy of the financial data presented for either company-owned or franchised locations.
For a prospective franchisee, this implies a higher degree of risk when relying on the financial performance representations provided in Item 19. Since the data is unaudited, there is no guarantee that the figures presented are completely accurate or free from errors. It is crucial for potential franchisees to conduct their own independent investigation and due diligence, possibly by consulting with a financial advisor or accountant, to assess the potential financial performance of a Black Bear Diner franchise.
This is a fairly common practice in the franchise industry, particularly for newer or smaller franchise systems. While audited financial statements provide a higher level of assurance, they can be costly to produce. The FDD explicitly advises franchisees to conduct their own independent investigation of costs and expenses, suggesting that they should not rely solely on the provided unaudited data. Franchisees are encouraged to speak with current and former franchisees to gather additional insights and validate the franchisor's claims.
In summary, the lack of audited financial statements for both company-affiliated and franchised restaurants in the Item 19 financial performance representation underscores the importance of thorough due diligence on the part of prospective Black Bear Diner franchisees. They should seek independent verification of the financial data and carefully consider the potential risks and rewards before investing in a franchise.