Under what condition does a Byrider franchisee pay for the cost of an audit?
Byrider Franchise · 2025 FDDAnswer from 2025 FDD Document
- 9/ If an audit shows no discrepancy, Byrider Franchising Partners pays the cost of the audit. If discrepancy is shown, you pay the cost of the audit. You also immediately pay Byrider Franchising Partners the amount owed plus interest at the highest rate allowed by law. If the discrepancy shows that you underpaid Byrider Franchising Partners by more than 2%, and Byrider Franchising Partners concludes that the under payment was intentional or grossly negligent, you promptly pay Byrider Franchising Partners an amount equal to 3 times the Royalty Fees and/or the Advertising Fees that are due, as well as interest at the highest rate allowed by law and all costs and expenses related to the audit by Byrider Franchising Partners representatives including salaries, travel costs, room and board and travel fees.
Source: Item 6 — Other Fees (FDD pages 21–32)
What This Means (2025 FDD)
According to Byrider's 2025 Franchise Disclosure Document, a franchisee is responsible for covering the expenses of an audit if the audit reveals a discrepancy in their financial reporting. This means that if the audit uncovers errors or underreporting of revenue, the franchisee will be required to pay for the cost of the audit itself. Furthermore, the franchisee must immediately remit the owed amount, along with interest calculated at the highest legally permissible rate.
In addition to covering the audit costs and rectifying the underpayment with interest, Byrider imposes further financial penalties if the underpayment exceeds 2% and is deemed intentional or due to gross negligence. In such cases, the franchisee must promptly pay Byrider an amount equal to three times the Royalty Fees and/or Advertising Fees that were originally due. This serves as a significant deterrent against financial mismanagement or intentional underreporting.
Moreover, the franchisee is liable for all costs and expenses incurred by Byrider representatives during the audit. This includes salaries, travel costs, room and board, and travel fees. This provision underscores the importance of accurate financial reporting and compliance with Byrider's standards, as any discrepancies can lead to substantial financial burdens for the franchisee, including not only the underpaid amounts and interest but also multiplied fees and comprehensive audit-related expenses.