If you don’t have a standard chart of accounts, you should work with your accountant or bookkeeper to develop one that can be used across your franchise. When you have franchisees not performing, reviewing real numbers early on can help you recognize the issue and provide guidance or additional training.

You should have access to those numbers perpetually. If a franchisee is uncomfortable with bookkeeping, have them go to their CPA or bookkeeper. You may even want to provide a preferred vendor that will do the books for them for a monthly fee.

Best Practice

Train your franchisees to make sure they understand their financial books. If that’s not their skill set, and the volume is there, encourage them to hire a third-party bookkeeper. A big mistake franchisors often make is that by being free-spirited entrepreneurs, they do whatever they want. They push whatever through the books, and they have a bit of cowboy in them, which is fine. That’s why you were successful. But that’s not who you’re selling to. You need to be disciplined enough not to treat your franchisees like you would want to be treated. And while that’s counterintuitive and breaks the golden rule, remember you’re the franchisor, not the franchisee. You would never buy a franchise because you can’t follow the rules.

Set up the franchisee correctly. Most have no idea when they walk in the door what they’re supposed to do. It is your responsibility. This includes the standard chart of accounts, manager non-competes, proof of insurance, etc. Don’t leave anything to chance and take as much uncertainty out of the process. You are preparing for chaos because being a franchisor is chaos; people are not paying you; people are going nuts, things are happening. But the more guardrails you put up to prepare for the chaos that will ensue, the better you can manage it.