Can Brain Balance require an audit of the franchisee's financial statements?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
COMPANY has the right to require that the foregoing statements of GR and profit and loss and balance sheet be audited by a certified public accountant acceptable to COMPANY in its reasonable discretion.
(d) Such other activity reports relating to the clients, including test results, progress reports, information, reports, and records relating to the Franchised Business as are requested by COMPANY.
7.02.
Throughout the term of this Agreement and for a period of six (6) years thereafter, FRANCHISEE shall keep and maintain at its Franchised Business office (or such other location approved by COMPANY in writing) all books of account, records, documents, and other materials required to support the financial statements and tax returns and other reports provided to COMPANY, all of which shall be prepared in accordance with generally accepted accounting principles ("Records").
Throughout the term of this Agreement and for a period of six (6) years thereafter, upon demand by COMPANY, FRANCHISEE shall permit COMPANY to inspect and make copies of the Records at any time during normal business hours.
- 7.03.
On five (5) days' prior notice to FRANCHISEE, COMPANY or its representatives may inspect the Franchised Business, audit and/or make copies of FRANCHISEE's books and records, or the Records, and/or enter and inspect the office in which FRANCHISEE conducts the Franchised Business for purposes of determining compliance with protocols, methodologies, Center layout, office neatness, reviewing records of the Franchised Business (including without limitation records concerning client census, maintenance of statistical data, accounts receivable, and collections), and general conformity of the Franchised Business operation with COMPANY's Operations Manual and/or interview FRANCHISEE's employees.
Except as provided in this Paragraph 7.03, such audit shall be at COMPANY's sole cost and expense.
In the event an audit discloses an underpayment by FRANCHISEE to COMPANY of Royalty and/or Advertising Fund contributions, FRANCHISEE shall immediately pay the amount due together with interest thereon as provided in Section 6.08 from the date on which such Royalty and Advertising Fund contributions should have been paid.
Source: Item 22 — CONTRACTS (FDD pages 70–72)
What This Means (2025 FDD)
According to Brain Balance's 2025 Franchise Disclosure Document, Brain Balance has the right to require a franchisee's statements of gross revenue, profit and loss, and balance sheet to be audited. This audit must be conducted by a certified public accountant acceptable to Brain Balance.
Brain Balance franchisees are obligated to maintain all books of account, records, documents, and other materials required to support the financial statements and tax returns provided to Brain Balance for the duration of the agreement and for six years after. These records must be kept at the franchised business office or another location approved by Brain Balance in writing and must be prepared according to generally accepted accounting principles.
Brain Balance can demand to inspect and copy these records at any time during normal business hours throughout the term of the agreement and for six years afterward. Brain Balance, or its representatives, may inspect the franchised business, audit, and/or make copies of the franchisee's books and records with five days prior notice. This includes inspecting the office where the franchisee conducts business to determine compliance with protocols, methodologies, center layout, and office neatness. They may also review records concerning client census, maintenance of statistical data, accounts receivable, and collections, and assess the general conformity of the franchised business operation with Brain Balance's Operations Manual, as well as interview the franchisee's employees.
Except when an audit reveals an underpayment of royalties or advertising fund contributions, Brain Balance will bear the cost of the audit. If an underpayment is discovered, the franchisee must immediately pay the amount due, along with interest from the date the payment should have been made.