Under what circumstances will an Embassy Suites franchisee be required to reimburse inspection and audit costs?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
- 10.3.3 If the audit or inspection reveals that the underpayment is willful, or is for five percent (5%) or more of the total amount owed for the period being inspected, you will also reimburse us for all inspection and audit costs, including reasonable travel, lodging, meals, salaries and other expenses of the inspecting or auditing personnel. Our acceptance of your payment of any deficiency will not waive any rights we may have as a result of your breach, including our right to terminate this Agreement. If the audit discloses an overpayment, we will credit this overpayment against your future payments due under this Agreement, without interest, or, if no future payments are due under this Agreement, we will promptly pay you the amount of the overpayment without interest.
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, a franchisee may be required to reimburse inspection and audit costs under specific circumstances related to underpayment of fees. If an inspection or audit reveals that the franchisee has understated or underpaid any amount due to Embassy Suites, the franchisee is responsible for paying the deficiency along with interest.
Specifically, if the audit or inspection reveals that the underpayment was willful or amounts to five percent (5%) or more of the total amount owed for the period being inspected, the franchisee must reimburse Embassy Suites for all inspection and audit costs. These costs include reasonable expenses such as travel, lodging, meals, salaries, and other expenses incurred by the inspecting or auditing personnel.
This provision serves as a deterrent against underreporting revenues and ensures that Embassy Suites is compensated for the expenses incurred when discrepancies are significant or intentional. It is important for prospective franchisees to maintain accurate records and ensure timely and correct payments to avoid these additional costs. Franchisees should also be aware that even if they pay the deficiency, Embassy Suites retains the right to pursue further action for breach of contract.