Under what condition can the Byrider franchise agreement be terminated due to compliance audit failures?
Byrider Franchise · 2025 FDDAnswer from 2025 FDD Document
y deficiencies referred to herein for the first occurrence if said occurrence is cured within five (5) business days upon written notice by the Company to the Franchisee.
- 13.4 Compliance Audits. The Company may from time to time perform compliance audits reviewing operations of the Franchisee's Business, such as legal regulatory compliance issues, marketing, and adherence to Byrider, CNAC, and Service Center operational standards ("Compliance Audits" or in the singular "Compliance Audit"). If Franchisee fails a Compliance Audit, in the reasonable judgment of the Company, a failure currently meaning a score of less than 80%, Franchisee shall pay to Company a penalty in the amount of $500.00 plus reimbursement of travel, food, and lodging for a second consecutive audit.
Source: Item 23 — Receipts (FDD pages 88–335)
What This Means (2025 FDD)
According to Byrider's 2025 Franchise Disclosure Document, Byrider can terminate the franchise agreement if a franchisee fails three consecutive compliance audits. These audits assess the franchisee's business operations, covering areas like legal and regulatory compliance, marketing practices, and adherence to Byrider's operational standards. A failing grade is defined by Byrider as scoring less than 80%.
If a franchisee fails the first compliance audit, they are given a chance to improve. However, failing a second consecutive audit results in a $2,500 penalty, plus reimbursement of travel, food, and lodging expenses for a third consecutive audit. Failing the third consecutive compliance audit incurs a $10,000 penalty, and Byrider then has the right to terminate the franchise agreement.
This termination is outlined in Section 16.2 of the franchise agreement. It is important to note that Byrider's judgment on whether a franchisee has satisfactorily passed the compliance audits is considered reasonable. This highlights the importance of franchisees maintaining high operational standards and addressing any deficiencies identified in the initial audits to avoid potential termination and financial penalties.