6 Reasons Why you Should Audit Franchisees (It’s not What you Think)

Whether you call them « audits », « assessments », « evaluations » or simply « visits », the practice of sending a district manager to a franchisee to uphold standards, answer questions, communicate best practices and coach is widespread. Let’s look at six reasons why franchisors should indeed “audit” franchisees plus one reason everyone thinks about, and perhaps shouldn’t.

Audits breed compliance

You can publish standards and train stores but many retailers report only achieving compliance when they demonstrate a commitment to those standards. Compliance with merchandising, service, safety and security standards (among others), is best achieved when everyone knows it will be verified and addressed.

Training is necessary… but not sufficient

Store staff may be trained, answer the quiz and pass the test, but are they applying their learned skills where it matters, enhancing the customer experience? Train your stores on the one hand, audit them on the other and treat the audit as a “continuous learning” exercise and an opportunity to coach each store to achieve the success it deserves.

Audits engage owners/franchisees

Audits engage owners/franchisees by continually reinforcing organizational standards and best practices. An audit is not a passive activity. It actively engages the store owner or franchisee to continually improve the store according to best practices. Describe each standard, attach a photo, assign the item and engage your audience by showing them what success looks like.

Different franchisees execute…differently

Assuming your retail brand consists of more than a handful of stores, you cannot know how stores really execute unless you have processes and auditing software to help you with this.  Operators execute differently. Franchisees may have different inclinations and priorities based on their own experience and sensibilities. There is nothing wrong with that, but you need to make sure that the core standards and programs that are the backbone of the brand’s strategy are indeed implemented in full, everywhere and every time. Audits align the vision and expectations of head office with the reality on the ground.

Each franchisee is a brand ambassador

Each franchise operator is a brand ambassador who speaks for the entire brand. A customer does not know, and does not care, whose name is on the franchise agreement. Disappoint a customer in one store and they may very well stop going to all stores! A failure to execute and meet the brand’s standards in one store doesn’t just hurt this operator’s sales and reputation, it hurts all other operators’ bottom line. Audit franchisees to ensure customer service standards are upheld across all locations.

Good franchisees attract…more good franchisees

An execution-minded brand not only attracts customers, it also attracts potential franchisees. Multi-unit retailers often spend considerable resources – dedicated websites and trade-shows – attracting new franchisees. Franchisees-to-be are more likely to invest their life savings with an operationally strong brand than with one perceived to be inconsistent and deficient.

What about financial audits…is that what you were thinking?

We might call this one “the elephant in the audit room”, the topic that is on everyone’s mind when the issue of franchise audits comes up. It is a common practice for franchisors to ensure their franchisees do not under-report sales. Doing so would lower the ongoing royalty fees paid.  While financial audits are necessary, they do not add much value over and above the need for financial transparency. Much like training, financial audits might be necessary but they are far from sufficient. The biggest opportunity for franchisors and franchisees alike is to treat the audit as a far broader coaching and training opportunity to uphold the brand’s standards, develop superlative customer service and drive the business forward.

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