Under what conditions must a Chatime 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.
- (6) The remedies referred to in this clause 4.2(6) 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, a Developer may be required to reimburse Chatime for the cost of an inspection or audit 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 associated expenses. This includes situations where the Developer doesn't furnish the necessary documentation or fails to submit them promptly.
Additionally, if an audit or inspection reveals that the Developer has understated the fees received by more than 2% for any audited period, the Developer must reimburse Chatime for the cost of the inspection or audit. This reimbursement covers expenses such as legal fees, accountant fees, and the travel and accommodation costs incurred by Chatime employees during the inspection or audit.
These remedies are in addition to any other rights Chatime has under the agreement or applicable law. This means that Chatime can pursue other legal or contractual remedies in addition to requiring the Developer to cover the costs of the inspection or audit. This provision incentivizes Chatime Developers to maintain accurate records and provide timely reports to avoid potential financial penalties and ensure compliance with the franchise agreement.