If an examination of a The Standardx franchise discloses an understatement of revenue, what fees and charges must the franchisee pay, and within what timeframe?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
If any examination discloses an understatement of the revenue, Franchisee agrees to pay Hyatt, within fifteen (15) days after receiving the examination report, the Royalty Fees, System Services Charges and other fees due on the amount of the understatement, together with the late fee and interest in accordance with Section 6.5.
Furthermore, if Hyatt determines that an examination is
necessary due to Franchisee's failure to furnish reports or other information when required, or if Hyatt's examination reveals a Royalty Fee or System Services Charge underpayment of three percent (3%) or more of the total amount owed during any six (6)-month period, or that Franchisee willfully understated the Hotel's revenue, Franchisee agrees to reimburse Hyatt for the costs of the examination, including out-of-pocket costs and compensation of Hyatt's employees. These remedies are in addition to Hyatt's other remedies and rights under this Agreement and applicable law.
Source: Item 18 — OTHER INCOME (LOSS), NET (FDD pages 187–399)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, if an examination reveals that a franchisee has understated their revenue, the franchisee is obligated to pay The Standardx the Royalty Fees, System Services Charges, and other fees that are due on the understated amount. These payments, along with any applicable late fees and interest as detailed in Section 6.5 of the agreement, must be made within fifteen (15) days of receiving the examination report.
Furthermore, The Standardx may require the franchisee to cover the costs of the examination itself under certain conditions. This includes situations where the examination was necessary because the franchisee failed to provide required reports or information, or if the examination uncovers an underpayment of Royalty Fees or System Services Charges that is three percent (3%) or more of the total amount owed during any six (6)-month period. The franchisee will also be responsible for examination costs if they willfully understated the hotel's revenue. These costs can include both out-of-pocket expenses and compensation for The Standardx's employees involved in the examination.
These remedies available to The Standardx are in addition to any other rights or remedies The Standardx may have under the Franchise Agreement or applicable law. This means that The Standardx could pursue other legal or contractual options in addition to requiring payment of the understated fees and examination costs. This provision underscores the importance of accurate financial reporting and compliance with the terms of the franchise agreement to avoid potential financial penalties and other repercussions.