What happens if a Caption By Hyatt audit reveals an understatement of revenue?
Caption_By_Hyatt Franchise · 2025 FDDAnswer from 2025 FDD Document
If any examination discloses an understatement of the revenue, Franchisee agrees to pay Hyatt, within fifteen (15) days after receiving the examination report, the Royalty Fees, System Services Charges and other fees due on the amount of the understatement, together with the late fee and interest in accordance with Section 6.5.
Furthermore, if Hyatt determines that an examination is necessary due to Franchisee's failure to furnish reports or other information when required, or if Hyatt's examination reveals a Royalty Fee or System Services Charge underpayment of three percent (3%) or more of the total amount owed during any six (6)-month period, or that Franchisee willfully understated the Hotel's revenue, Franchisee agrees to reimburse Hyatt for the costs of the examination, including out-of-pocket costs and compensation of Hyatt's employees.
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to Caption By Hyatt's 2025 Franchise Disclosure Document, if an audit reveals an understatement of revenue, the franchisee is responsible for paying Caption By Hyatt the owed Royalty Fees, System Services Charges, and other fees on the underreported amount. This payment must be made within 15 days of receiving the examination report, and it will also include late fees and interest as outlined in Section 6.5 of the agreement.
Furthermore, Caption By Hyatt may require the franchisee to cover the costs of the examination itself under certain conditions. Specifically, if the audit was necessary because the franchisee failed to provide required reports or information, or if the underpayment of Royalty Fees or System Services Charges is 3% or more of the total amount due during any six-month period, or if the franchisee willfully understated the hotel's revenue, the franchisee must reimburse Caption By Hyatt for all examination expenses. These expenses include out-of-pocket costs and compensation for Caption By Hyatt's employees involved in the audit.
This policy underscores the importance of accurate financial reporting and compliance with the franchise agreement. Franchisees should maintain meticulous records and ensure timely submission of all required reports to avoid potential penalties and audit costs. The 3% threshold for underpayment is a critical benchmark, as exceeding this level can trigger significant financial repercussions for the franchisee.