What is the Browns Chicken franchisee's obligation to cooperate with representatives of Brown's Chicken during an audit?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall fully cooperate with representatives of Brown and independent accountants hired by Brown to conduct any such inspection or audit. In the event any such inspection or audit shall disclose an understatement of the Gross Sales of the Store, Franchisee shall pay to Brown, within fifteen (15) days after receipt of the inspection or audit report, the royalty fees and advertising contributions due on the amount of such understatement, plus interest from the date originally due until the date of payment. Further, in the event such inspection or audit is made necessary by the failure of Franchisee to furnish reports, supporting records, other information or financial statements, as herein required or to furnish such reports, records, information or financial statements on a timely basis, or if an understatement of Gross Sales for the period of any audit is determined by any such audit or inspection to be greater than two percent (2%), Franchisee shall reimburse Brown for the cost of such inspection or audit, including, without limitation, the charges of attorneys and any independent accountants, applicable per diem charges for employees of Brown and all of their travel and room and board expenses. The foregoing remedies shall be in addition to all other remedies and rights of Brown hereunder or under applicable law.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, a franchisee must fully cooperate with representatives of Browns Chicken and independent accountants hired by Browns Chicken to conduct any inspection or audit. This obligation ensures that Browns Chicken can accurately assess the franchisee's compliance with the franchise agreement and maintain the integrity of the Browns Chicken system.
If an audit reveals an understatement of gross sales, the franchisee is responsible for paying the royalty fees and advertising contributions due on the understated amount, along with interest from the original due date. Furthermore, if the audit was necessitated by the franchisee's failure to provide required reports or if the understatement of gross sales exceeds two percent (2%), the franchisee must reimburse Browns Chicken for the cost of the audit. This includes charges for attorneys, independent accountants, per diem charges for Browns Chicken employees, and their travel and lodging expenses.
This requirement is fairly standard in franchising, as franchisors need to verify sales figures to calculate royalties and advertising fees accurately. The potential financial consequences of non-compliance, such as covering audit costs and paying interest on underreported sales, underscore the importance of maintaining accurate records and cooperating fully with Browns Chicken's audit procedures. Prospective franchisees should be prepared to maintain meticulous financial records and promptly address any discrepancies identified during an audit to avoid penalties.