Under what conditions will a Hardees franchisee be required to reimburse HR for the cost of an audit or inspection?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
HR or its designee shall have the right at all reasonable times, both during and after the term of this Agreement, to inspect, copy and audit Franchisee's books, records, federal, state and local tax returns, and such other forms, reports, information and data as HR reasonably may designate, applicable to the operation of the Franchised Restaurant. If an inspection or audit discloses an understatement of Gross Sales, Franchisee shall pay HR, within 10 days after receipt of the inspection or audit report, the deficiency in the royalty fees and advertising contributions plus interest (at the rate and on the terms provided in Section 7.F.) from the date originally due until the date of payment. 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 HR 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 HR's employees or designees involved in the audit or inspection. The foregoing remedies shall be in addition to all other remedies and rights available to HR under this Agreement or applicable law.
If Franchisee fails to provide HR on a timely basis with the records, reports and other information required by this Agreement or, upon request of HR, with copies of same, HR or its designee shall have access at all reasonable times (and as often as necessary) to Franchisee's books and records for the purpose, among other things, of preparing the required records, reports and other information. Franchisee promptly shall reimburse HR or its designee for all costs and expenses associated with HR obtaining such records, reports or other information. Franchisee also acknowledges that HR has the right at any time to communicate directly with Franchisee's lenders, any other creditors, any suppliers and all regulatory authorities regarding Franchisee, Franchisee's business or any aspect of the Franchised Restaurant.
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to Hardees' 2025 Franchise Disclosure Document, a franchisee may be required to reimburse HR (presumably Hardees Restaurants) for the cost of an audit or inspection under specific circumstances. If an inspection or audit reveals an understatement of Gross Sales, the franchisee is responsible for paying the deficiency in royalty fees and advertising contributions, along with interest. This interest is calculated from the original due date until the payment date, as detailed in Section 7.F of the agreement.
In addition to the deficiency payment, Hardees will require the franchisee to cover the reasonable costs of the audit or inspection if certain conditions are met. These conditions include the franchisee's failure to provide required reports or supporting records, failure to provide these documents on time, or if the audit reveals that the understatement of Gross Sales exceeds 2% of the actual sales for the audited period. The reimbursement covers all associated expenses, including attorney and accountant fees, as well as travel, accommodation, and compensation for Hardees' employees or designees involved in the audit.
Furthermore, if a Hardees franchisee fails to provide the necessary records, reports, and other information as required by the franchise agreement, Hardees has the right to access the franchisee's books and records to prepare these documents themselves. In such cases, the franchisee is responsible for promptly reimbursing Hardees for all costs and expenses associated with obtaining this information. This provision ensures that Hardees can maintain accurate financial oversight and compliance across all its franchise locations, with the costs of non-compliance ultimately borne by the franchisee.