Does the franchisee's obligation to reimburse Buildingstars for underreported sales survive the termination of the Franchise Agreement?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
BUILDINGSTARS may, from time to time, cause one or more complete audits to be made of the affairs and records relating to the operations of the Business.
Upon request by BUILDINGSTARS, FRANCHISEE shall make such books, records and information available to BUILDINGSTARS or its designated representative at all reasonable times for review and audit by BUILDINGSTARS at FRANCHISEE'S place of business.
If it is found that FRANCHISEE underreported Gross Sales, FRANCHISEE will reimburse BUILDINGSTARS for the amount of the Account Sales Fees, Administration Fees, Royalty Fees, and Insurance Program Fees, if applicable, that would have been billed had billings been reported accurately, plus interest on those amounts at the rate of the lesser of one and one-half percent (1-1/2%) per month or the maximum legal rate in the jurisdiction where the Business is located.
In addition, in the event that an audit by BUILDINGSTARS results in a determination that any or all of the Account Sales Fee, Administration Fees, Royalty Fees and Insurance Program Fees, if applicable, paid to BUILDINGSTARS are deficient (underpaid) by more than two percent (2%), the FRANCHISEE shall promptly pay to BUILDINGSTARS any amounts shown to be due and all costs and expenses incurred by BUILDINGSTARS in conducting the subsequent audit to determine that the FRANCHISEE is reporting correctly (not the audit which disclosed the original deficiency), including salaries of BUILDINGSTARS' representatives, travel costs, room and board and audit fees.
Nothing contained herein shall constitute an agreement by BUILDINGSTARS to accept any payments after the same are due or commitment by BUILDINGSTARS to extend credit to or otherwise finance the FRANCHISEE'S operation of the Business.
The obligations of this provision survive termination or expiration of the Agreement.
Source: Item 22 — CONTRACTS (FDD page 43)
What This Means (2025 FDD)
According to Buildingstars's 2025 Franchise Disclosure Document, the franchisee's obligation to reimburse Buildingstars for underreported sales does indeed survive the termination or expiration of the Franchise Agreement. Buildingstars retains the right to audit the franchisee's business records. If an audit reveals that the franchisee underreported gross sales, the franchisee is obligated to reimburse Buildingstars for the underpaid Account Sales Fees, Administration Fees, Royalty Fees, and Insurance Program Fees, if applicable. This reimbursement will also include interest, calculated at the lesser of 1.5% per month or the maximum legal rate applicable in the location of the business.
Furthermore, if the audit determines that the underpayment of these fees exceeds 2%, the franchisee is responsible for covering not only the deficient amounts but also all costs and expenses Buildingstars incurs in conducting a subsequent audit to verify correct reporting. These costs can include salaries of Buildingstars' representatives, travel expenses, room and board, and audit fees.
This provision ensures that Buildingstars can recover lost revenue due to underreporting, even after the franchise relationship ends. It also incentivizes accurate reporting by franchisees, as the costs associated with underreporting can be substantial, including the initial underpaid fees, interest, and the expenses of subsequent audits. This survival clause is a standard practice in franchising, designed to protect the franchisor's financial interests and ensure compliance with the franchise agreement.