Under what conditions will a The Standardx franchisee be required to reimburse Hyatt for the costs of an examination/audit?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
Hyatt may at any time during Franchisee's regular business hours, and with prior notice to Franchisee, examine Franchisee's and the Hotel's business and accounting records, tax records and returns, and other records.
Franchisee agrees to cooperate fully in any examination.
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, a franchisee may be required to reimburse Hyatt for examination costs under specific circumstances. Hyatt has the right to examine a franchisee's business and accounting records, tax records, and other relevant documents, provided they give prior notice and conduct the examination during regular business hours. The franchisee is obligated to fully cooperate during such examinations.
The Standardx franchisee will be required to reimburse Hyatt for the costs of the examination, including out-of-pocket expenses and employee compensation, if the examination is deemed necessary due to the franchisee's failure to furnish required reports or information. Reimbursement is also required if the examination reveals a Royalty Fee or System Services Charge underpayment of three percent (3%) or more of the total amount owed during any six-month period. Additionally, if the franchisee willfully understated the Hotel's revenue, they must reimburse Hyatt for the examination costs.
These stipulations are in addition to any other remedies or rights Hyatt possesses under the Franchise Agreement or applicable law. This means that The Standardx franchisee could face additional penalties or legal actions beyond simply reimbursing the examination costs. It is important for prospective franchisees to understand these conditions, as they highlight the financial risks associated with non-compliance or errors in reporting revenue and fees.