Friday, 23 December 2016

Sales and Reporting in a Franchising Context

Sales | Dollars | Money | Report | Profit

Most franchise systems incorporate processes which rely on a combination of sales data recording and reporting mechanisms.

The collection of sales data has a number of uses in a franchise system:
  1. the Franchisor may use such data as a key performance indicator (KPI), for example, the Franchisee maybe required to reach certain minimum sales targets; 
  2. where a Franchisor operates a Marketing Fund, the Franchisor may use the data for the purpose of calculating a marketing levy in the form of a percentage (%) of gross of net sales turnover during a specified period; 
  3. the Franchisor may also use the data for the purpose of calculating a royalty payment based on a percentage (%) of gross of net sales turnover during a specified period; 
  4. the retention of historical sales data can assist with sales forecasts and determining the amount of revenue that will be generated during different periods. This information can be used to formulate specific marketing strategies for different times of the year. 
For Franchisors, given the importance sales data may have within a particular franchise system, it is critical to ensure:
  • Franchisees correctly record the data; 
  • reports provided by Franchisees are completed properly and supplied to the Franchisor in a timely manner; 
  • that Franchisors review the data and reports on a regular basis; and 
  • where anomalies are identified, appropriate attention is given to the issue and a plan of action put in place to address the issue of concern. 
Typically, the Franchise Agreement will include a number of provisions which set out a Franchisee’s obligations around this data recording and reporting.

From a Franchisee’s perspective, it is important they understand these obligations as a failure to meet record keeping and reporting requirements will likely result in a breach of the Franchise Agreement, and potentially give the Franchisor a right to terminate the franchise arrangement.

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The material provided in this document is for general information only and is not to be relied upon as advice. No responsibility is accepted for any loss, damage or injury, financial or otherwise, suffered by any person or organisation acting or relying on this information or anything omitted from it.

Copyright © Greyson Legal 2016, All rights reserved.

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