Franchisees are required to submit reports to the franchisor on a regular basis.
Here are 6 reasons why:
- To ensure that franchisees are paying their fair share of royalties. Franchisees who are not paying the prescribed royalty fee interrupt the franchisor’s cash flow and thus are a threat to the system as a whole.
- To be proactive about any franchisee running into financial difficulties. If financial difficulties are detected early on, the franchisor can be more proactive about the situation.
- To know the individual performance of a franchisee as it compares to other franchisees. You might have a 35% employee turnover rate, but other franchisees average a 20% employee turnover rate. Metrics like this provide the franchisee with an area to focus on to improve the performance of their business.
- To monitor overall business trends. Are certain categories of retail items not selling anymore and need to be replaced with another product? Monitoring business trends like this can make it easier to make key business decisions to help grow the business.
- To monitor consistency of the brand which includes the quality of the service being provided. Consistency is key to franchise success which means products and services offered need to be consistent no matter the location. For example, franchisors often ask for a report regarding how customer complaints are handled store to store.
- To comply with governmental laws which require franchisees to pay government remittance and taxes. Submissions to the government may also be GST/HST reports, payroll reports and employment insurance. Failure to pay government remittance and taxes could result in the government stepping in and closing the business.
It may feel sometimes like “big brother” is watching, but ultimately franchisees benefit from submitting reports too. You can get the feedback or support you need to improve your operations –one of the biggest benefits of running a franchise when compared to opening a business on your own.
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