Franchise royalty audit

What is a franchise royalty fee? Do you have to make periodic franchise royalty payments? Royalty audits are often part of a larger franchise compliance program, which can include site visits and evaluations, interviews with customers and employees, and written reports being delivered to franchisees and managers.

Accurate royalty and marketing fund payments not only benefit you as the franchiser , they also benefit all of your individual franchise owners — assuring dollars for marketing and promotional programs are shared fairly by all franchisees. At the heart of StoneBridge Business Partners’ franchise and royalty compliance auditing is a thorough search for common under-reporting problems and other issues that can cut your profitability: inefficiencies and mismanagement. This process maximizes your Compliance efforts and identifies underreported Royalty Fees. Our success and client satisfaction is due to the specialized service we provide to clients. Our fee structure is lower than others because we keep overhead to a minimum and focus on franchising.

Audits are one way to monitor franchisee compliance. However, for most franchise systems, putting a franchisee on notice that it will be subject to an audit is a difficult step. Some franchisors see it as contrary to building and developing a cooperative business relationship.

If your franchise fee is the cost of joining the franchisor ’s business family, royalty fees are the cost of staying in the family. Each franchise location is owned by an individual. But, the entire franchise is run by a larger company. For example, someone in your town could own and operate a local fast food restaurant.

But the entire restaurant brand is owned by one, superior entity. The brand already has an established customer base. When someone buys a franchised business, they already know that there’s a strong demand for their products or services. Both parties have different roles in operating the company.

They should sign a franchise contract before starting a business together. To own a franchise, the franchisee must pay the franchisor certain fees. The fees allow the franchisee to own the rights to the business’s bran products, and services.

The franchisor must make every fee known to the franchisee. Franchises consist of franchisors and franchisees. The franchisee pays an initial fee, which is like an entry charge to the franchise.

To stay in the franchise, the franchisee pays an ongoing royalty fee. Sometimes, the franchisee pays additional fees. A mistake in transaction records could result in the franchisee or the franchisor being paid incorrectly. See full list on cpapracticeadvisor.

Using online accounting for small business can help franchise owners and franchisors communicate about the business’s finances. They can access the software program from anywhere with an Internet connection so that both parties have instant access financial records. Using a single software provider for accounting and payroll for franchises could also lead to a volume discount for these services.

Even if you decide to outsource your books to an accountant, payroll for accountantscould drastically decrease the financial burden on your overhead. Request more information on franchise opportunity for free. Search franchise by location, category, capital requirement and more! ServiceBridge provides full traceability of changes for any data records in a ServiceBridge account (as customers, jobs, invoices, payments and etc.). The importance of royalty payments Royalties are typically a franchisor’s primary source of income.

Because royalties are typically based on a percentage of revenue, auditors pay close attention to the franchisee’s revenue reporting process. This should be covered in the franchise agreement. Legal Royalty Audit for Intellectual Property Revenue Streams Are you receiving the revenue that you should from your apps, video, and other digital platforms? Our law firm can coordinate a legal audit. Audit Fee This type of franchise fee arises when the franchisor requires financial audits of its locations.

Here, the franchisee may have to pay for the cost of the audit , especially if irregularities are found. Audit fees are common to most franchise agreements. Indee further evidence from the US franchise market, where franchise or royalty auditing is more widespread than in the UK, suggests that a program of audits across the franchise network will derive greater and greater support from the network, than one off specifically targeted audits against franchises known to be under declaring sales.

Financial statement auditors typically focus on materiality thresholds deemed relevant to acceptable accuracy of overall financial statements. The royalty report reflects cumulative sales total, and as the franchisee exceeds the target, the royalty rate drops on future sales until the next sales target is reached. Remember, with a franchise business, the franchisor is like a not-so-silent partner.

If they sense impropriety, they have the right to perform a full audit , even if it was just a mistake in bookkeeping.