What costs are included when Body20 charges a franchisee for an audit due to understatement of gross sales?
Body20 Franchise · 2025 FDDAnswer from 2025 FDD Document
If any such audit or review discloses an understatement of the Gross Sales for any period or periods, you will pay to us, within 10 days after demand for payment is made, all additional Royalty Fees, Brand Fund Fees, or other amounts required to be paid based upon the results of such audit or review. In addition, if such understatement for any period or periods is 2% or more of the Gross Sales for such period or periods, we may charge you up to 120% of the cost of such audit or review, including the charges of any independent accountant and any related attorneys' fees and the cost of travel and living expenses and wages for such accountant and employees or other agents of us. You will pay to us, upon demand, on any delinquent fees interest at the lesser of 18% per annum or the maximum rate allowed by law calculated from the date when the fees should have been paid to the date of actual payment. These remedies are in addition to our other remedies and rights under this Agreement and Applicable Laws.
Source: Item 23 — RECEIPT (FDD pages 74–251)
What This Means (2025 FDD)
According to Body20's 2025 Franchise Disclosure Document, if an audit reveals that a franchisee has understated their Gross Sales, the franchisee will be responsible for covering several costs. Specifically, the franchisee must pay Body20 any additional Royalty Fees, Brand Fund Fees, or other amounts that should have been paid based on the audit's findings. This ensures that Body20 receives the correct percentage of revenue as outlined in the franchise agreement.
In addition to the unpaid fees, if the understatement of Gross Sales is significant, defined as 2% or more for any period, Body20 can charge the franchisee up to 120% of the audit's cost. This cost can include charges from an independent accountant, related attorney's fees, and expenses related to travel, lodging, and wages for the accountant and Body20's employees or agents involved in the audit. This provision serves as a deterrent against underreporting sales figures, as the financial penalties can be substantial.
Furthermore, the franchisee is also responsible for paying interest on any delinquent fees. The interest rate is the lesser of 18% per annum or the maximum rate allowed by law, calculated from the date the fees were originally due until the date of actual payment. These financial repercussions are in addition to any other remedies or rights Body20 has under the Franchise Agreement and applicable laws, highlighting the importance of accurate financial reporting by the franchisee.