What is a Franchise Audit?

The success of a franchise business is mainly dependent on the franchisor’s ability to maintain compliance across all franchises. However, franchisees often stray from laid down agreements which pose a risk to the integrity and financial health of the franchise network. As a franchisor, it’s important to arm yourself with a tool to monitor, measure and identify issues fast to ensure complete compliance across the board. A franchise audit is one of those tools.

What’s a Franchise Financial Statement audit?

A franchise audit serves as a tool to monitor franchise compliance with branding standards, operational and financial obligations and other franchise agreements. It aims to identify discrepancies in financial statement reports and other inconsistencies that may arise from non-compliant franchise activities.

Why does my Franchise need an Audit?

At its core, a franchise audit report helps you stay one step ahead of any legal issues like tax evasion that arise from poor financial reporting. Furthermore, it helps identify areas that need more support, managerial issues and curb underreporting.


Although it’s best to initiate a franchise audit regularly, the approach depends on the terms of the franchise agreement. For example, some franchises might allow the franchisor to initiate an audit without placing them on notice. While others might require that a notice period be included to allow them to prepare for the audits.


Generally, a franchise audit shouldn’t only focus on the financial health but consider its operational efficiency. 


Going beyond auditing just the accounting and business practices of the franchise network will improve the efficiency, productivity and profitability of the franchise.


Need help with your franchise auditing?

Contact us at Metwallycpa to get your franchise audited and remain compliant with generally accepted accounting standards.


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