Does Engel & Volkers' Chapter 4 on Financial Reporting and Payments specify the requirements for documentation retention related to financial reporting?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Sales Advisors, change status, production history of Sales Advisors, and compensation models for Sales Advisors and other data as may be required by Franchisor.
All reports will be provided by Franchisor for completion and submitted electronically, and by its submission, Franchisee will represent that the data submitted are accurate and complete.
Franchisee agrees to submit to Franchisor a forecast of Gross Revenues and the number of personnel it expects to use for each of its successive financial years during the Term not later than December 31 of the preceding financial year.
Franchisee shall maintain, in an organized and complete fashion, all such reports, as well as written business, accounting, tax, sales, and financial records of its business in accordance with best practices in the industry.
13.2 Inspections and Certifications: Franchisor and Franchisee agree that it is essential to preserve the standards and uniformity of the ENGEL & VÖLKERS System. Consequently, Franchisee hereby grants Franchisor or its appointed agents the right to perform audits of its office organization, accounting procedures, and other aspects of the Residential Real Estate Brokerage at reasonable times during normal business hours, with or without prior notice to Franchisee, and at the same time to allow inspection of its business documents for the purpose of verifying compliance with the standards and quality required under this Agreement and adherence to those elements of the ENGEL & VÖLKERS System that relate to Franchisee providing residential real estate services under this Agreement. Franchisor shall be entitled to appoint third parties, in particular accountants, to exercise these inspection rights. Franchisor has the right to have Franchisee's books and records
will be audited by the auditors of Franchisor (or authorized third parties acting on their behalf) in accordance with customary standards. Franchisee hereby undertakes to give Franchisor or such authorized parties any necessary assistance. Franchisee will submit to Franchisor on completion of the audit of its annual accounts, a schedule certified by the auditor listing commission payments received against invoices ("Certified Commission Statement").
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, franchisees are required to maintain organized and complete reports, along with written business, accounting, tax, sales, and financial records, adhering to best practices in the industry. Engel & Volkers retains the right to audit the franchisee's office organization, accounting procedures, and other business aspects at reasonable times, with or without prior notice. This includes inspecting business documents to verify compliance with the standards and quality required by the franchise agreement. Engel & Volkers can also appoint third parties, such as accountants, to conduct these inspections.
Failure to maintain the financial records as required in Section 13 of the agreement can be considered a breach of the franchise agreement. Additionally, concealing revenues, maintaining false books or records, falsifying information, or submitting substantially false reports to Engel & Volkers are also grounds for breach. Specifically, understating gross revenues by 2% or more at least three times within a 36-month period, or by 5% or more for a single reporting period, can lead to consequences. Refusing Engel & Volkers permission to inspect or audit the business can also result in a breach of contract.
These stipulations highlight the importance of accurate and transparent financial record-keeping for Engel & Volkers franchisees. Franchisees must ensure their records are well-maintained and accessible for audits to avoid potential breaches of the franchise agreement. This level of scrutiny is fairly standard in franchising, as franchisors need to protect the integrity and consistency of their brand across all locations.