What happens if a Black Bear Diner audit reveals that my Gross Sales were understated?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor requires all Royalty Fee payments, Marketing Fund Contributions, product purchases and other amounts due to Franchisor to be paid through an Electronic Depository Transfer Account. Franchisee agrees to establish an account providing for electronic funds transfer, and Franchisor shall have access to such account for the purpose of receiving amounts due to Franchisor from Franchisee. Franchisee agrees to execute any documents as Franchisor's or Franchisee's bank requires in order to implement the Electronic Deposit Transfer Account. Franchisee agrees not to close the Electronic Deposit Transfer Account without Franchisor's approval. A copy of Franchisor's current form of authorization known as the "Authorization Agreement For Automatic Debit" is included as Exhibit E.
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
Based on the 2025 Black Bear Diner Franchise Disclosure Document, if an audit reveals understated Gross Sales, the franchisee will be responsible for paying the deficiency, along with interest. Black Bear Diner requires all Royalty Fee payments, Marketing Fund Contributions, product purchases, and other amounts due to be paid through an Electronic Depository Transfer Account.
The franchisee must establish and maintain an account for electronic funds transfer, granting Black Bear Diner access to receive payments. The franchisee agrees not to close this account without prior approval from Black Bear Diner and must execute any documents required by the banks to implement the Electronic Deposit Transfer Account.
These measures ensure that Black Bear Diner can accurately collect royalties, marketing fund contributions, and other fees based on the franchisee's Gross Sales. Underreporting sales would be a breach of the franchise agreement, leading to financial penalties and potential legal consequences. Franchisees should maintain accurate records and report sales transparently to avoid such issues.