Under what conditions will a Bonchon franchisee be required to pay for the cost of an audit?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 6: OTHER FEES]
- [8] 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, a franchisee will be responsible for covering the expenses of an audit under specific circumstances related to the underreporting of gross revenues. If Bonchon audits a franchisee's business and discovers that the franchisee understated gross revenues on their weekly statements, the responsibility for audit costs will depend on the extent of the underreporting.
Specifically, if the underreporting falls between 2% and 5% for any week or the entire period examined, the franchisee must immediately pay Bonchon the cost of the audit. In addition to covering the audit expenses, the franchisee is also obligated to pay the additional amounts owed due to the underreporting, along with interest calculated at the highest legal rate or, if there is no maximum legal rate, at 4% above the then-current Wall Street Journal prime rate of interest.
However, if the underreporting of gross revenues is 5% or more for any week or the entire period, Bonchon has the right to terminate the Franchise Agreement. In this case, the franchisee is responsible for paying the amount due, including interest, and must also cover the cost of the audit. Conversely, if the underreporting is 2% or less, Bonchon will cover the cost of the audit, while the franchisee is still responsible for paying the amount due plus interest. The FDD specifies that these percentages are fixed and will not change during the term of the Franchise Agreement.