Can Brain Balance require the franchisee's financial statements to be audited?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
ANY) prepared and reviewed by a certified public accountant acceptable to COMPANY in its reasonable discretion, and verified and signed by FRANCHISEE as to the information furnished to such accountant. 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.
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 demand that a franchisee's gross revenue (GR), profit and loss statements, and balance sheets be audited by a certified public accountant that Brain Balance approves.
Brain Balance can also inspect and copy a franchisee's records. The franchisee must keep all records, documents, and other materials needed to support the financial statements, tax returns, and other reports provided to Brain Balance for the current term of the agreement and for six years after. These records must be kept at the Brain Balance center or another location approved by Brain Balance in writing and must follow generally accepted accounting principles.
Brain Balance can inspect the franchised business, audit and/or make copies of the franchisee's books and records, and/or enter and inspect the office where the franchisee conducts business after giving five days' notice. This is to ensure that the franchisee is following the protocols, methodologies, center layout, and office neatness standards, as well as to review records and interview employees. Unless otherwise specified, Brain Balance will bear the cost of the audit.
If an audit reveals that the franchisee has underpaid royalties or advertising fund contributions, the franchisee must immediately pay the outstanding amount, along with interest from the date the payment was originally due.