franchising aspects Mar, 26 2012

Audits pave way for franchise success

The success of any franchise business largely depends on the running of the franchise system. Therefore, it is essential to build, monitor and maintain the standards set up by the franchisor for his franchise. This can be done by regular audits of franchi

By Abha Garyali
Sub Editor
Audits pave way for franchise success

Every entrepreneur wishes to make his business successful. However, only a few reach that level of success while others are left behind in the race. Running a franchise is not as easy as it seems to both the franchisor and franchisee. Both the parties have to define, monitor and maintain the standards as set by the brand initially. Therefore, it is essential for franchisors to include a clause of franchise audits in their franchise agreements to maintain standard of the brand. The article would educate and inform the franchisors as well as the franchisees the importance of audits in franchising.

What are franchise audits?

The term ‘audit’ stands for valuation or appraisal of a person, organization, system, process, enterprise, project or product. In general, it refers to audits in accounting, but it can also take place in project management, quality management, etc. This term is included in franchising as well. Running and maintaining a franchise network is not an easy job. It is well known that franchisees play an integral role for the future success and popularity of a brand. However established a brand may be, if franchisees do not maintain the standard of even one of the outlets, the downfall of the whole franchise network would follow. Hence, a lot of cooperation and compliance from franchisees is a must for success of any franchise brand. However, it is the duty of the franchisor to keep in check all his franchisees and maintain the standards of the brand. For this, audits are a way to monitor franchisee compliance. Franchise audits refer to the periodical checks conducted by the franchisors to ensure complete compliance by the franchisees. Franchise audits ensure proper functioning of the operations, store setups, monetary obligations, etc., by all franchisees.  The franchisor sometimes puts all his franchisees on a notice of an audit or can also pay a visit to any of his franchised outlets to check the services and general outlook of the store.

Importance of franchise audits

For franchisors:As mentioned, audits are essential to supervise and maintain the standards of any franchise business. A few franchisors do not include the clause of regular audits as they feel it might create problems with their franchisees. But at later stages it would surely lead to dire consequences if a few franchisees deviate from regulations as set by the franchisor and under-perform as well. Therefore, it is must for franchise owners to perform franchise audits from time to time. The franchisor can scrutinize his franchisee for different issues like sales underreporting, marketing initiatives, display, staff, uniforms, cleanliness, records, stocks and inventory, pricing strategies, after-sale services, opening and closing timings, improper product purchase or wastage, etc.  This will make the franchisee attentive and he will perform better in his outlet, and hence make the brand more popular and profitable.

For franchisees:Franchisees can also benefit from franchise audits. Owing to regular audits franchisees get to understand their weaknesses, which they can overcome through the recommendations made by the auditors. Moreover, they can also become more educated about new software coming into the market to improve account maintenance. They come to know how to make the most of their resources. Through auditing franchisees can also come to know about their small errors they commit which bring down the profits made by the brand.  A few franchisees may have a high rate of wastage which can be checked and improved upon with the help of audits.

This article brings out the basics of franchise audits that is getting more and more essential with the concept of franchising developing and increasing its presence in the country. To conclude, it can be said that franchise audits are as important as making a franchise agreement between the franchisor and franchisee.

Every entrepreneur wishes to make his business successful. However, only a few reach that level of success while others are left behind in the race. Running a franchise is not as easy as it seems to both the franchisor and franchisee. Both the parties have to define, monitor and maintain the standards as set by the brand initially. Therefore, it is essential for franchisors to include a clause of franchise audits in their franchise agreements to maintain standard of the brand. The article would educate and inform the franchisors as well as the franchisees the importance of audits in franchising.

What are franchise audits?

The term ‘audit’ stands for valuation or appraisal of a person, organization, system, process, enterprise, project or product. In general, it refers to audits in accounting, but it can also take place in project management, quality management, etc. This term is included in franchising as well. Running and maintaining a franchise network is not an easy job. It is well known that franchisees play an integral role for the future success and popularity of a brand. However established a brand may be, if franchisees do not maintain the standard of even one of the outlets, the downfall of the whole franchise network would follow. Hence, a lot of cooperation and compliance from franchisees is a must for success of any franchise brand. However, it is the duty of the franchisor to keep in check all his franchisees and maintain the standards of the brand. For this, audits are a way to monitor franchisee compliance. Franchise audits refer to the periodical checks conducted by the franchisors to ensure complete compliance by the franchisees. Franchise audits ensure proper functioning of the operations, store setups, monetary obligations, etc., by all franchisees.  The franchisor sometimes puts all his franchisees on a notice of an audit or can also pay a visit to any of his franchised outlets to check the services and general outlook of the store.

Importance of franchise audits

]For franchisors:As mentioned, audits are essential to supervise and maintain the standards of any franchise business. A few franchisors do not include the clause of regular audits as they feel it might create problems with their franchisees. But at later stages it would surely lead to dire consequences if a few franchisees deviate from regulations as set by the franchisor and under-perform as well. Therefore, it is must for franchise owners to perform franchise audits from time to time. The franchisor can scrutinize his franchisee for different issues like sales underreporting, marketing initiatives, display, staff, uniforms, cleanliness, records, stocks and inventory, pricing strategies, after-sale services, opening and closing timings, improper product purchase or wastage, etc.  This will make the franchisee attentive and he will perform better in his outlet, and hence make the brand more popular and profitable.

For franchisees:Franchisees can also benefit from franchise audits. Owing to regular audits franchisees get to understand their weaknesses, which they can overcome through the recommendations made by the auditors. Moreover, they can also become more educated about new software coming into the market to improve account maintenance. They come to know how to make the most of their resources. Through auditing franchisees can also come to know about their small errors they commit which bring down the profits made by the brand.  A few franchisees may have a high rate of wastage which can be checked and improved upon with the help of audits.

This article brings out the basics of franchise audits that is getting more and more essential with the concept of franchising developing and increasing its presence in the country. To conclude, it can be said that franchise audits are as important as making a franchise agreement between the franchisor and franchisee.

Related: Franchising Rules The Career Path

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