Can Sonesta Select Sonesta Essential be required to have its financial statements audited?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
You agree to establish and maintain at your own expense a bookkeeping, accounting, and recordkeeping system conforming to the requirements and formats we prescribe from time to time. We
may require you to use a Computer System to maintain certain sales data and other information. We may also require you to use a third party approved by us for accounting and bookkeeping services. You agree to give us in the manner and format that we prescribe from time to time:
- (a) On or before the 10th day of each month, (i) a report for the preceding month of all revenue generated at your Hotel, the Gross Rooms Revenue of your Hotel, room occupancy rates, reservation data and other information we require, and (ii) the profit and loss and cash flow statements and the balance sheet for the preceding month and year to date for the then current fiscal year;
- (b) within 90 days after the end of each fiscal year, annual profit and loss and source and use of funds statements and a balance sheet for your Hotel as of the end of that calendar year, prepared in accordance with generally accepted accounting principles or, at our option, international accounting standards and principles. We reserve the right to require that you have these financial statements and the financial statements of any prior fiscal years audited, at your expense, by an independent accounting firm designated by us in writing;
Source: Item 22 — CONTRACTS (FDD page 84)
What This Means (2025 FDD)
According to Sonesta Select Sonesta Essential's 2025 Franchise Disclosure Document, franchisees may be required to have their financial statements audited. Sonesta Select Sonesta Essential reserves the right to require franchisees to have their annual financial statements, as well as financial statements from prior fiscal years, audited. This audit would be at the franchisee's expense and must be performed by an independent accounting firm designated by Sonesta Select Sonesta Essential in writing.
This requirement allows Sonesta Select Sonesta Essential to ensure the accuracy and compliance of financial reporting across its franchise network. It also gives them insight into the financial health of individual franchise locations.
For a prospective franchisee, this means they need to be prepared for the potential cost of an audit, which can be a significant expense. They should factor this into their financial planning and understand that Sonesta Select Sonesta Essential has the authority to mandate such audits. It is also important to maintain accurate and organized financial records to facilitate any potential audit process. Franchisees should clarify with Sonesta Select Sonesta Essential what criteria would trigger an audit and which accounting firms are pre-approved to conduct these audits.