Under what conditions must a Chatime franchisee reimburse the franchisor 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 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.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee may be required to reimburse Chatime for the cost of an inspection or audit under specific circumstances. These circumstances arise if Chatime believes an inspection or audit is necessary due to the franchisee's failure to provide required reports, supporting records, other information, or financial statements, or if these items are not furnished on time.
Additionally, if an audit or inspection reveals that the franchisee has understated the fees received by more than 2% for the audited period, the franchisee will be responsible for reimbursing Chatime for the inspection or audit costs. These costs encompass legal and accounting fees, as well as the travel and accommodation expenses incurred daily by Chatime employees.
This provision in the franchise agreement ensures that Chatime can recover expenses associated with ensuring compliance and accurate financial reporting from its franchisees. It also incentivizes franchisees to maintain accurate records and provide timely reports to avoid bearing the costs of audits or inspections. Franchisees should be aware of these conditions and maintain diligent record-keeping practices to avoid potential reimbursement obligations.