What records can Chatime inspect, audit, and copy?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (1) Franchisor and its agents may at any time during normal Business Hours inspect, audit and make copies or extracts of the records and reports described in clause 5.4 and any other business records, bookkeeping and accounting records, electronic records and files, value added, sales, use, service, and income tax records and returns, and other records of The Franchised Business.
- (2) Franchisor may, at any time, during normal Business Hours and one hour before and one hour after normal Business Hours, inspect the premises of the Outlet for the purpose of:
- (a) Monitoring compliance by Franchisee of its obligations under this Agreement; and
- (b) Ensuring compliance by Franchisee of its financial obligations under this Agreement and for the purpose of verifying any financial information provided by Franchisee to Franchisor.
- (3) Franchisor may conduct an audit of Franchisee's books of account. The audit may be performed by independent accountants appointed by Franchisor. Franchisee must fully cooperate with representatives of Franchisor and independent accountants appointed by Franchisor to conduct such inspection or audit.
- (4) If any such audit discloses an understatement of the initial and/or recurring fees received by Franchisee under this Agreement, Franchisee must pay to Franchisor within 15 days after receipt of the inspection or audit report the fees due on the amount of such understatement plus interest at the rate and on the terms provided for in this Agreement from the date originally due until the date of payment.
- (5) If in Franchisor's opinion, an inspection or audit is required because of the failure of Franchisee 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 Franchisee for the period of any audit is determined by any such audit or inspection to be greater than 2%, Franchisee 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.
- (6) The remedies referred to in this clause 5.5 will be in addition to all other remedies and rights of Franchisor under this Agreement or under any applicable law.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, Chatime and its agents have the right to inspect, audit, and make copies or extracts of various records related to the franchisee's business. This includes records and reports described in clause 5.4 of the franchise agreement, as well as any other business records, bookkeeping and accounting records, electronic records and files, value added, sales, use, service, and income tax records and returns, and other records of the franchised business.
This broad access allows Chatime to monitor the franchisee's compliance with the franchise agreement and to verify the financial information provided by the franchisee. Chatime can conduct these inspections and audits at any time during normal business hours, and even one hour before and one hour after normal business hours. Furthermore, Chatime may appoint independent accountants to perform the audit, and the franchisee is obligated to fully cooperate with these representatives.
If an audit reveals an understatement of fees, the franchisee is responsible for paying the due fees plus interest. Additionally, if the understatement of fees exceeds 2% or if the audit was required due to the franchisee's failure to provide necessary reports or information, the franchisee must reimburse Chatime for the cost of the inspection or audit, including legal and accounting fees, as well as travel and accommodation expenses for Chatime's employees. These remedies are in addition to any other rights Chatime has under the agreement or applicable law.
This level of scrutiny is fairly standard in franchising, as franchisors need to protect their brand and ensure consistent financial reporting across all locations. However, prospective Chatime franchisees should be aware of the potential costs associated with audits, especially if they are found to have underreported fees or failed to provide timely information.