What records of the Hyper Kidz Business is Hyper Kidz entitled to inspect and audit?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
We shall have the right, at any time during business hours, and with or without notice to you, to inspect and audit or cause to be inspected and audited the business records, bookkeeping and accounting records, value added, sales, use and service and income tax records and returns and other records of the Hyper Kidz Business, and the books and records of any corporation, partnership, limited liability company or other entity which holds the Franchise. Any such audit may be performed by independent accountants hired by us. You shall fully cooperate with our representatives and independent accountants hired by us to conduct any such inspection or audit. Our right to audit shall also include our right to access the computer system electronically, as provided in this Agreement.
In the event any such inspection or audit shall disclose an understatement of the Gross Sales of the Hyper Kidz Business, you shall pay to us, within fifteen (15) days after receipt of the inspection or audit report, the Royalty Fees and Brand Development Fees due on the amount of such understatement plus interest at the rate and on the terms provided for herein from the date originally due until the date of payment. In the event an understatement of Gross Sales for any period included in any audit is determined by any such audit or inspection to be two percent (2%) or more, then (a) you must pay any understated amount together with interest thereon, and (b) you shall reimburse us for the cost of such inspection or audit including, without limitation, reasonable legal fees and accountants' fees, and the travel expenses, room and board and applicable per diem charges for our representatives or agents. The foregoing remedies shall be in addition to all our other remedies and rights hereunder or under applicable law.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, Hyper Kidz has extensive rights to inspect and audit various aspects of the franchisee's business operations. Hyper Kidz can inspect the physical site, including equipment, fixtures, signs, inventory, and supplies. They can also observe, photograph, and video tape the operations. Hyper Kidz can remove product samples for testing without payment, interview personnel and customers, and inspect and copy any books, records, and documents related to the business.
Hyper Kidz also has the right to access the franchisee's computer system electronically to monitor information concerning inventory, sales, Gross Sales, and other stored data. Franchisees must maintain the necessary communications equipment and internet access to facilitate this electronic access.
Furthermore, Hyper Kidz can inspect and audit business records, bookkeeping and accounting records, and tax records and returns. This includes the records of any corporation, partnership, limited liability company, or other entity holding the franchise. These audits can be conducted by Hyper Kidz or independent accountants they hire, and franchisees must fully cooperate with these audits. If an audit reveals understated Gross Sales of two percent (2%) or more, the franchisee must pay the understated amount with interest and reimburse Hyper Kidz for the cost of the audit, including legal and accounting fees.