Five ways for franchisors to prepare for an audit

Much of the success of your franchising business depends on the performance of your franchisees so it’s critical you know and understand what  is going on in your system and undertake regular audits for compliance.

Audits are a great way of checking all aspects of the business to ensure it’s running smoothly. It helps identify aspects the franchisor needs to focus on in the franchise system or potential issues which may help prevent breaches by a franchisee.

So how do you do this? Here are five practical ways to prepare for an audit:

  1. Make sure you set your right to audit a franchisee in the franchise agreement. This way, everyone is on the same page regarding what the process will be and what is expected – such as frequency (generally once or twice a year), documentation needed, etc.
  2. Select who you want to run the audit. You can choose to have a dedicated auditor (member of your team or an unrelated third party) or a consultant.
  3. Identify areas of focus for your audit. Obviously, numbers are important however, it’s also important to look at wages, product and service quality, branding/marketing and the overall premises.
  4. Notify your franchisee of the upcoming audit, providing them with a timeframe to pull together the necessary information and, if necessary, prepare.
  5. Review the results. Sit down with your franchisee to run through what’s going well and where there is room for improvement. Make sure any breaches are rectified immediately. Document actions with a timeframe for each.

Auditing doesn’t need to be a stressful process if you prepare and collaborate with your franchisees. It can send a strong message about maintaining best practices within your franchise system and can actually strengthen the relationship you have with your franchisee.

If you have any questions about what the auditing process involves, please contact Racha Abboud.