Under what circumstances related to audits will a Body20 franchisee be required to pay additional royalty fees, brand fund fees, or other amounts?
Body20 Franchise · 2025 FDDAnswer from 2025 FDD Document
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, a franchisee may be required to pay additional fees if an audit reveals an understatement of Gross Sales. Specifically, if Body20 audits a franchisee's financial statements and finds that the franchisee has understated their Gross Sales for any period, the franchisee will be required to pay the additional Royalty Fees, Brand Fund Fees, or other amounts that would have been due based on the correct Gross Sales figures. This payment must be made within 10 days of demand.
Furthermore, if the understatement of Gross Sales is significant, meaning 2% or more of the Gross Sales for the period in question, Body20 may also charge the franchisee for the costs associated with the audit. This can include up to 120% of the audit costs, encompassing charges from independent accountants, attorneys' fees, and travel and living expenses for the accountant and Body20's employees or agents involved in the audit.
In addition to these payments, Body20 may also charge interest on any delinquent fees at a rate of the lesser of 18% per annum or the maximum rate allowed by law. This interest is calculated from the date the fees were originally due until the date of actual payment. These remedies available to Body20 are in addition to any other rights and remedies they may have under the Franchise Agreement or applicable laws.