Under what conditions will a Chicken Guy franchisee be required to reimburse Chicken Guy for the cost of an audit or inspection?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
If an inspection or audit is made necessary by Franchisee's failure to furnish reports or supporting records as required under this Agreement, or to furnish such reports, records or information on a timely basis, or if an understatement of Gross Sales for the period of any audit is determined by any audit or inspection to be greater than 2%, Franchisee also shall reimburse Chicken Guy for the reasonable cost of the audit or inspection including, without limitation, the charges of attorneys and independent accountants, and the travel expenses, room, board and compensation of Chicken Guy's employees or designees involved in the audit or inspection.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, a franchisee may be required to reimburse Chicken Guy for the cost of an audit or inspection under specific circumstances. If an audit or inspection is triggered because the franchisee failed to furnish required reports or supporting records, or did not provide them in a timely manner, the franchisee will be responsible for covering the reasonable costs of the audit or inspection. These costs can include charges from attorneys and independent accountants, as well as travel expenses, room and board, and compensation for Chicken Guy's employees or designees involved in the audit.
Additionally, if an audit or inspection reveals that the franchisee understated their Gross Sales by more than 2% for the audited period, the franchisee will also be required to reimburse Chicken Guy for the reasonable cost of the audit or inspection. This provision serves as a financial deterrent against inaccurate reporting of sales figures, ensuring that Chicken Guy receives the correct royalty fees and advertising contributions.
These audit rights and potential cost reimbursements are in addition to any other remedies or rights that Chicken Guy may have under the Franchise Agreement or applicable law. It is important for prospective franchisees to maintain accurate and timely records to avoid triggering these audit-related costs and to ensure compliance with the franchise agreement.