Does Engel & Volkers have the right to audit a franchisee's books and records?
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.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, Engel & Volkers retains the right to audit a franchisee's business. Engel & Volkers can audit the franchisee's office organization, accounting procedures, and other aspects of the Residential Real Estate Brokerage. These audits can be performed at reasonable times during normal business hours, with or without prior notice to the franchisee. Engel & Volkers may also inspect business documents to verify compliance with the standards and quality required under the Franchise Agreement. Engel & Volkers can appoint third parties, including accountants, to conduct these inspections.
Engel & Volkers requires franchisees to maintain organized and complete reports, along with written business, accounting, tax, sales, and financial records in accordance with industry best practices. Failure to maintain these financial records as required in Section 13 of the agreement can result in a breach of contract.
Furthermore, Engel & Volkers can deem a franchisee in default if an audit reveals that the franchisee understated gross revenues by 2% or more at least three times within a 36-month period, or by 5% or more for the applicable reporting period. Refusal to allow Engel & Volkers to inspect or conduct operational and/or financial audits of the franchised business or any other franchisee-operated Engel & Volkers Residential Real Estate Brokerages also constitutes a default.