Why audit your franchisees’ compliance? For franchisors, a franchisee compliance audit program is a must to ensure that your network is delivering the right products and services in line with your brand standards and franchise system.
Conducting regular audits of your franchisees in relation to their obligations as a franchisee, as a business owner, and as an employer will also serve as a deterrent to your network that, as a franchisor, you will not tolerate non-compliance in the operation of their franchise.
An audit program may also help to identify how franchisors can improve on their processes and operations based on the results and feedback from the network.
How often should a compliance audit be conducted?
As a rule of thumb each franchise should be put through a compliance audit at least once a year, however it is not uncommon to see franchisors conducting bi-annual audits to ensure that everything is kept compliant.
In circumstances where the Field Coaches are conducting the compliance audits, it’s possible for audits to be further broken down into several stages, audited on a more frequent basis.
Who should conduct a compliance audit?
There are two main schools of thought when it comes down to deciding who within your business should complete a franchisee compliance audit;
The field coach: while this can facilitate a better buy in from the franchisees within their territory, it can also be challenging for the individual to go from compliance to coach without some discomfort.
Conducted by a dedicated auditor: by engaging an individual who is not the coach, whether that be another franchisor team member or a third party, you are allowing the field coach to dedicate 100 per cent of their time to supporting growth and performance of the franchisees.
What are the key areas a compliance audit should address?
A franchisee audit should look at the key components of the franchise system, the non-negotiables in the areas of performance, product, promotion, premises and people.
While compliance in all areas of the franchise system are important, the success of any franchise business is underpinned by consistency of brand and product. The key to supporting consistency in these areas often relies on the franchisee engaging the right people to work in their business and deliver the service and experience to your customers in a location that is clean well presented.
When we think performance, we tend to tie it in directly with performance of numbers, however rather than auditing the bottom-line figure the franchisee’s business is generating, consider elements as simple as whether the franchisee is providing the franchisor with the necessary reporting on a regular basis (e.g. monthly or quarterly P&L, annual business plan and budget, etc.), and whether they are doing so in a timely manner.
The performance element of an audit should look deeper into the engagement of the franchisee within the network by addressing their attendance at meetings and conferences, participation in forums and discussions, and whether they are sending team members to franchisor coordinated training programs.
Consistency in products, or services, within your franchise network are vital. Your customers will expect consistency in delivery, availability and quality are all very important.
The audit of the product element would likely include:
- Core range compliance
- Using approved and preferred suppliers
- Display and merchandising of products
- Product mix ratios to maximise sales
One of the most beneficial reasons for being a part of a franchise system is the brand; the product/service and promotion. What is being sold, and how is it being sold?
A brand style guide should be provided to all franchisees that clearly outlines what they can and cannot do with the brand elements, what type of social media or advertising is permitted during campaign periods, and uniform and personal presentation standards for franchisees and their team members.
Tying in with product and promotion, the premises – the image of the shop-front, office, and even vehicles – is how the public perceives the brand. Ensuring that this is always kept to the highest of standards is import for long-term success.
- The cleanliness of the premises;
- Obligations to workplace health and safety; and
- Fitout and equipment maintenance; and
Franchisors can be held responsible for breaches of the Fair Work Act by franchisees within their franchise network. The seriousness of these matters placing a significant amount of importance on franchisors checking that their franchisees understand and are always doing the right thing by their employees.
When auditing the HR compliance of a franchisee, it is important to check:
- Wages and employee entitlements are paid in accordance with agreements and awards.
- Payslips are distributed in accordance with regulation.
- Superannuation payments are being made at the correct rate to your employee’s nominated fund.
- All contractor arrangements are valid and legal.
- Records are being written and kept (for example, written warnings, meeting minutes, performance review notes).
You’ve completed your audits, now what?
Another key step of the franchisee audit is to ensure that the results are reviewed, and any non-compliance’s are addressed and rectified as soon as possible.
For any non-conformance or opportunity identified, there should be an agreed action and timeframe to remedy the issue. This should be done in collaboration with the franchisee. It is important that there is accountability of the action items and a willingness to improve standards of the business.
Your field team should continue to work with the franchisees post audit to measure performance and improve business opportunities long after it has been completed.