What interest rate will Bonchon charge on underreported gross revenues discovered during an audit?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
If we audit your Business, and you understated the Gross Revenues on the weekly statements you submitted to us by more than 2% but less than 5% for any week or for the entire period, when compared with your actual Gross Revenues, then you must immediately pay us the cost of the audit and the additional amounts owing, plus interest at the highest legal rate or, if there is no maximum legal rate, then 4% above the then-current Wall Street Journal prime rate of interest.
If you understated your Gross Revenues by 5% or more for any week or for the entire period,
we can terminate the Franchise Agreement and you must pay the amount due, plus interest and the cost of the audit. If you understated your Gross Revenues by 2% or less for any week or for the entire period, you must immediately pay us the amount due, plus interest, but we will pay the cost of the audit.
The percentages described in this footnote are fixed and will not change during the term of the Franchise Agreement.
Source: Item 6 — OTHER FEES (FDD pages 13–24)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, if an audit reveals that a franchisee has underreported gross revenues, the interest rate charged depends on the extent of the underreporting. If the underreported amount is more than 2% but less than 5% for any week or the entire period, Bonchon will charge interest at the highest legal rate. If there is no maximum legal rate, then the interest will be 4% above the then-current Wall Street Journal prime rate of interest.
If the underreporting is 5% or more for any week or the entire period, Bonchon can terminate the Franchise Agreement. In this case, the franchisee must pay the amount due, plus interest, and cover the cost of the audit. However, if the underreporting is 2% or less for any week or the entire period, the franchisee must pay the amount due, plus interest, but Bonchon will cover the cost of the audit.
This policy incentivizes accurate reporting of gross revenues. Franchisees should ensure their financial reporting is precise to avoid triggering an audit and potential penalties or even termination of the agreement. The FDD specifies that these percentages are fixed and will not change during the term of the Franchise Agreement.