Can Devon Creek designate a third-party accounting services firm that the franchisee must use?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
- 12.2.4. Franchisor reserves the right to require Franchisee to engage the services of a thirdparty accounting services firm, designated and approved by Franchisor for the first twelve months of operation. Following the first twelve months, Franchisee may choose their accounting services firm provided that: in the event that (i) Franchisee fails to keep books and records in accordance with Franchisor's standards or (ii) Franchisor, in its sole discretion, determines that use of a third-party accounting services firm by all System franchisees is beneficial to the System.
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, Devon Creek has the right to require franchisees to use a third-party accounting services firm that they designate and approve for the first 12 months of operation. This means that for the initial year of business, a new Devon Creek franchisee will not have the freedom to choose their own accounting firm and must use the one specified by the franchisor.
After the first year, the franchisee can select their own accounting services firm, but this is conditional. Devon Creek retains the right to mandate the use of a designated third-party accounting firm if the franchisee fails to maintain their books and records according to Devon Creek's standards. Additionally, Devon Creek can require all franchisees in the system to use a third-party accounting firm if they determine it is beneficial to the overall system.
This requirement ensures that all Devon Creek franchisees initially adhere to consistent financial reporting standards, which can help maintain the integrity and uniformity of financial data across the franchise system. However, franchisees should be aware that non-compliance with Devon Creek's bookkeeping standards or a system-wide decision by Devon Creek could result in the continued requirement to use the franchisor's designated accounting firm beyond the first year. Prospective franchisees should inquire about the specific standards for bookkeeping and the criteria Devon Creek uses to determine if a third-party accounting firm is beneficial for the entire system.