Does the Body20 franchise agreement specify who bears the cost of travel and living expenses for Body20 representatives during an audit triggered by an 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.
Source: Item 23 — RECEIPT (FDD pages 74–251)
What This Means (2025 FDD)
According to the 2025 Body20 Franchise Disclosure Document, if an audit reveals that a franchisee has understated their gross sales, the franchisee may be responsible for covering the costs associated with the audit. Specifically, if the understatement is 2% or more of the gross sales for the period being audited, Body20 has the right to charge the franchisee up to 120% of the audit costs.
These costs may include charges from an independent accountant, related attorney's fees, and the travel and living expenses and wages for the accountant, employees, or other agents of Body20 involved in the audit. The franchisee is required to pay these amounts within 10 days after demand for payment is made by Body20.
This policy means that Body20 franchisees need to ensure accurate reporting of gross sales. Underreporting, even if unintentional, can lead to significant financial penalties beyond the additional royalty and brand fund fees owed. The franchisee bears the risk of these audit-related expenses if the understatement threshold is met.