What are the Buildingstars franchisee's obligations regarding audits (Item 9) and how does this relate to potential bankruptcy (Item 4)?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
HISEE is not adequately servicing the customer account. Factors which BUILDINGSTARS considers include, but are not limited to the following: Customer complaints, unresponsiveness to Customer or BUILDINGSTARS, allegations by Customer of theft or breakage, lateness or failure to complete the job in a professional manner. In such event, BUILDINGSTARS does not have any obligation to replace said Customer Account with another.
- I. Right to Audit. 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 Royalty Fees, Account Sales Fees, Administration Fees, Insurance Program Fees and Management Fees charges 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 Royalty Fees, Account Sales Fees, Administration Fees, Insurance Program Fees and Management Fees 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 the 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.
- J. Replacement of Customer Accounts.
What This Means (2025 FDD)
According to Buildingstars's 2025 Franchise Disclosure Document, Buildingstars has the right to audit a franchisee's business records. Buildingstars may conduct these audits periodically to ensure the franchisee is accurately reporting gross sales. The franchisee is obligated to provide access to all relevant books, records, and information at their place of business for review by Buildingstars or its representatives.
If an audit reveals that the franchisee has underreported gross sales, the franchisee must reimburse Buildingstars for the underpaid Royalty Fees, Account Sales Fees, Administration Fees, and Insurance Program Fees. This reimbursement will also include interest, calculated at the lesser of 1.5% per month or the maximum legal rate in the relevant jurisdiction. Furthermore, if the underpayment of these fees exceeds 2%, the franchisee is responsible for covering all costs and expenses Buildingstars incurs in conducting the audit to verify correct reporting, including salaries of Buildingstars' representatives, travel costs, room and board, and audit fees.
Regarding bankruptcy, Buildingstars will replace a customer account if the customer ceases business, becomes insolvent, or declares bankruptcy within the first six months of service. In such cases, Buildingstars will offer the franchisee a new customer account with monthly contract revenue equal to the lost account's revenue. However, the franchisee will not receive a refund on Account Sales Fees already paid and must continue payments on any outstanding Account Sales Fee according to the Promissory Note. Buildingstars also retains the right to discontinue a franchisee's service to a customer account if they determine the service is inadequate, without obligation to replace the account.