What costs and expenses is a Byrider franchisee responsible for if an audit reveals a deficiency?
Byrider Franchise · 2025 FDDAnswer from 2025 FDD Document
shall be kept for a period of at least three (3) years following the end of each calendar year. The Company 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 Franchisee's Business. Upon request by the Company, the Franchisee shall make such books, records and information available to the Company or its designated representative at all reasonable times for review and audit by the Company at the Business Location. In the event that an audit by the Company was triggered because of Franchisee's failure to provide the reports required under this Agreement, results in a determination that the Royalty Fee and/or Advertising Fees paid to the Company are deficient (underpaid) by more than 2%, or the Company reasonably concludes that the deficient payment was intentional or grossly negligent by the Franchisee, the Franchisee shall promptly pay to the Company an amount equal to three (3) times the Royalty Fee and/or Advertising Fee shown to be due and all costs and expe
Source: Item 23 — Receipts (FDD pages 88–335)
What This Means (2025 FDD)
According to Byrider's 2025 Franchise Disclosure Document, a franchisee may incur significant costs if a company audit reveals deficiencies in Royalty and/or Advertising Fees. Specifically, if an audit is triggered by the franchisee's failure to provide required reports, or if the audit determines that Royalty and/or Advertising Fees were underpaid by more than 2%, or if Byrider reasonably concludes the deficient payment was intentional or grossly negligent, the franchisee will face substantial financial penalties.
In such cases, the Byrider franchisee must promptly pay Byrider an amount equal to three times the Royalty Fee and/or Advertising Fee shown to be due. Additionally, the franchisee is responsible for covering all costs and expenses incurred by Byrider in conducting the audit. These expenses include the salaries of Byrider's representatives involved in the audit, their travel costs, room and board, and the audit fees themselves. This provision underscores the importance of accurate and timely financial reporting by the franchisee.
However, Byrider provides a limited exception: these penalties will not apply for the first occurrence of a deficiency if the franchisee cures the deficiency within five business days of receiving written notice from Byrider. This offers a grace period for franchisees to correct unintentional errors. This clause highlights the importance of maintaining accurate financial records and promptly addressing any discrepancies identified by Byrider to avoid potentially significant financial repercussions.