Does Browns Chicken have the right to poll the franchisee's cash register to verify Gross Sales?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
hisee's name, photograph, and biographical and financial data concerning the operation of Franchisee's business, as well as photographs of the interior and exterior of Franchisee's Store, in Brown's advertising and other literature promoting BROWN's Stores.
C. Brown's Right to Audit.
Brown shall have the right at any time during business hours, and without prior notice to Franchisee, to inspect and audit, or cause to be inspected and audited, the business records, bookkeeping and accounting records, sales and income tax records and returns and other records of the Store and the books and records of any corporation or partnership which holds the Franchise. 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.
**14.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, Browns Chicken has extensive audit rights. Browns Chicken has the right to inspect and audit the franchisee's business records, bookkeeping and accounting records, sales and income tax records, and other records of the store at any time during business hours without prior notice. This includes the books and records of any corporation or partnership that holds the franchise.
The franchisee is required to fully cooperate with Browns Chicken's representatives and independent accountants during any inspection or audit. If an audit reveals an understatement of Gross Sales, the franchisee must pay the royalty fees and advertising contributions due on the understated amount, plus interest, within 15 days of receiving the audit report.
Furthermore, if the audit is necessitated by the franchisee's failure to provide required reports, records, information, or financial statements, or if the understatement of Gross Sales exceeds two percent (2%), the franchisee will be responsible for reimbursing Browns Chicken for the cost of the inspection or audit. This includes charges for attorneys, independent accountants, per diem charges for Browns Chicken's employees, and their travel and lodging expenses. These remedies are in addition to any other rights Browns Chicken has under the agreement or applicable law.
In addition to Browns Chicken's audit rights, franchisees must establish and maintain a bookkeeping, accounting, and record-keeping system that conforms to Browns Chicken's requirements, including the format, use, and retention of sales checks, cash register tapes, purchase orders, invoices, payroll records, check stubs, sales tax records, and returned cash receipts and disbursements journals and general ledgers. Franchisees must also furnish Browns Chicken with weekly and monthly sales reports, as well as unaudited and audited financial statements.