What happens if a Body20 franchisee fails to timely report Gross Sales?
Body20 Franchise · 2025 FDDAnswer from 2025 FDD Document
(w) You fail to timely file any periodic report required in this Agreement or the Manuals three or more times in a 12-month period, whether or not we provide you with notice of your default or you subsequently cure the default;
8.5 Auditing. Without limiting the foregoing, we may audit or cause to be audited any statement you are required to submit pursuant to Section 8.2 (Reports and Financial Statements) and we may review, or cause to be reviewed, the records maintained by the Franchisee Parties or any bank or other financial institution used by you in connection with the Studio. 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, failing to timely file any periodic report required in the Franchise Agreement or the Manuals three or more times in a 12-month period constitutes a breach of the agreement, regardless of whether Body20 provides notice of the default or whether the franchisee subsequently cures the default. This can lead to termination of the franchise agreement.
Additionally, if a Body20 franchisee underreports Gross Sales, there are financial repercussions. If an audit or review uncovers an understatement of Gross Sales for any period, the franchisee must pay Body20 all additional Royalty Fees, Brand Fund Fees, or other amounts due based on the audit results within 10 days of demand.
Furthermore, if the understatement is 2% or more of Gross Sales for any period, Body20 may charge the franchisee up to 120% of the audit or review costs. These costs can include charges from independent accountants, attorneys' fees, and travel, living, and wage expenses for the accountant and Body20's employees or agents. Delinquent fees also accrue interest at the lesser of 18% per annum or the maximum rate allowed by law from the date the fees were originally due until the date of actual payment. These financial penalties are in addition to any other remedies Body20 has under the Franchise Agreement and applicable laws.
It is important for prospective Body20 franchisees to understand the implications of these requirements. Accurate and timely reporting of Gross Sales is critical to avoid penalties, audits, and potential termination of the franchise agreement. Franchisees should ensure they have systems in place to track and report sales accurately and meet all reporting deadlines.