Under what circumstances must the Developer reimburse Chatime for the cost of 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 Developer may have to reimburse Chatime for inspection or audit costs under specific circumstances. If Chatime believes an inspection or audit is necessary due to the Developer's failure to provide required reports, records, information, or financial statements in a timely manner, the Developer may be responsible for covering the expenses.
Additionally, if an audit or inspection reveals that the Developer has understated the fees received by more than 2% for any audit period, the Developer will be required to reimburse Chatime for the cost of the inspection or audit. This reimbursement covers expenses such as legal fees, accountant fees, and the daily travel and accommodation costs for Chatime employees involved in the process.
This provision ensures that Chatime can recover costs associated with ensuring compliance and verifying financial information provided by the Developer. It also incentivizes the Developer to maintain accurate records and provide timely reports to avoid triggering an audit and potential reimbursement obligations. The remedies available to Chatime, including the right to be reimbursed for audit costs, are in addition to any other legal rights or remedies Chatime may have under the agreement or applicable law.