What are the specific obligations of a Bonchon franchisee regarding the maintenance of accurate financial records (Item 9), and how does the franchisor audit these records to ensure compliance with the Franchise Agreement?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
11.02 Financial Records and Audit
- A. You agree to record all Gross Revenues received by and all expenditures made by you or your franchised Business. You further agree to keep and maintain adequate records of all such Gross Revenues and expenditures and to maintain accurate books, records and tax returns, including related supporting material (such as cash receipts, and credit and charge records) for your franchised Business. We may specify, in our Manuals or otherwise, the forms and media that you will be required to use in recording your franchised Business' Gross Revenues and expenditures. You agree to keep and preserve for seven years (or such longer period as may be required by any law, rule or regulation) the types and classes of electronic and/or other books, records and tax returns that we specify in our Manuals or otherwise, along with all business, personnel, financial and operating records, in any media, relating to your franchised Bonchon Business. If you do not maintain the required records, this will be a material and incurable breach of this Agreement which, unless we waive the breach, will entitle us to terminate this Agreement immediately upon notice to you, with no opportunity to cure.
- B. We and/or our agents (who may be outside accountants and auditors), designees and/or employees will have the right, at any time, with or without written notice, during normal business hours, to enter your Bonchon Restaurant and any other premises from which the Business is conducted, in a fashion calculated not to disrupt your Restaurant's and Business's operations, to inspect, audit and make copies of all records including, but not limited to, the following: books of accounts; bank statements; cash or other receipts; checkbooks; documents; records; sales and income tax returns (federal, state, foreign and, if applicable, city); and, your files relating to programs, services and products sold, business transacted and expenditures relating to the Business. These files must include (without limitation) your operating records; bookkeeping and accounting records; customer lists; customer job orders; operating records; operating reports; correspondence; general
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, franchisees have explicit responsibilities for maintaining financial records and are subject to audits by Bonchon. Franchisees must meticulously record all gross revenues and expenditures related to their Bonchon business, maintaining accurate books, records, and tax returns along with supporting documentation like cash receipts and credit card records. Bonchon may specify the required forms and media for recording this financial data in their manuals or other communications. These records must be preserved for seven years, or longer if required by law. Failure to maintain these records constitutes a material and incurable breach of the Franchise Agreement, potentially leading to immediate termination without an opportunity to rectify the situation.
Bonchon retains the right to audit a franchisee's financial records to ensure compliance. Bonchon or its agents can enter the Bonchon restaurant or any premises where the business is conducted, during normal business hours, with or without notice, to inspect, audit, and copy all relevant records. This includes books of accounts, bank statements, cash receipts, checkbooks, documents, sales and income tax returns, and files related to programs, services, products sold, business transacted, and expenditures. These files encompass operating records, bookkeeping and accounting records, customer lists, customer job orders, operating reports, and correspondence.
These stipulations are typical in franchising, as franchisors need to ensure brand consistency, calculate royalties accurately, and maintain the integrity of the franchise system. The detailed record-keeping requirements and audit rights allow Bonchon to monitor the financial health of its franchisees and enforce compliance with the Franchise Agreement. Prospective franchisees should be prepared to maintain meticulous records and cooperate fully with any audits conducted by Bonchon.