What costs are included when Chatime seeks reimbursement from a Chatime Developer for an inspection or audit?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (5) If in Franchisor's opinion an inspection or audit is required because of the failure of Developer to furnish reports, supporting records, other information or financial statements as required, or to furnish such reports, records, information or financial statements on a timely basis, or if an understatement of fees received by Developer for the period of any audit is determined by any such audit or inspection to be greater than 2%, Developer must reimburse Franchisor for the cost of such inspection or audit, including, without limitation, legal fees and accountants fees, and the travel and accommodation expenses applicable per day for employees of Franchisor.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a Chatime Developer may be required to reimburse Chatime for the cost of an inspection or audit under specific circumstances. If an audit reveals that the developer has understated fees received by more than 2%, or if the audit was necessary due to the developer's failure to provide required reports or information on time, the developer is responsible for covering the expenses.
The costs that Chatime may seek reimbursement for include legal fees, accountant fees, and the travel and accommodation expenses incurred daily by Chatime employees during the inspection or audit. This means that in addition to rectifying any underpaid fees with interest, a developer could face significant additional expenses if their reporting is inaccurate or untimely.
This provision serves as an incentive for Chatime developers to maintain accurate and timely financial reporting. The potential for incurring these additional costs underscores the importance of diligent record-keeping and compliance with Chatime's reporting requirements. Prospective developers should be aware of these potential costs and ensure they have systems in place to accurately track and report financial information to avoid triggering an audit and subsequent reimbursement obligations.