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Franchise accounting is a specialist branch of accounting focused on helping franchisees/franchisors manage and support complicated business structures – often involving multiple locations, administrative systems and staff teams simultaneously. All in all, it is fair to say that this particular strand of accounting requires exceptional finesse and management skill. Whoever handles your franchise accounting must be able to juggle complex payroll demands, navigate different debt management/reconciliation structures, as well as have a working knowledge of all the financials associated with rights, trademarks, and licenses. While this may sound thoroughly overwhelming, at Nordens, we’re proud to say that we’re up to the challenge.
In business, you need to trust that everyone involved is taking care of their side of things to the best of their ability. You need to know, categorically, that every single member of the team is delivering. With so many other aspects of business to think about, this is arguably even more important in the world of the franchise. Why gamble with your finances? At Nordens, we understand that your needs are a little different.
Nordens’ franchise specialists are equipped to deal with every aspect of the franchising process – no matter the scale (or ambitions) of the business. Whether you’re on the franchisee or franchisor side of the fence, Nordens are exceptionally familiar with all administrative demands you will come up against in the franchise arena – from loan application processes through to compensation plans, debt management and potential tax investigations. Regardless of where you are in the franchise process – if you’re just starting out you’re or seasoned professional, if you are in search of reliable support from highly-trained franchise accountants, Nordens could be of service to you!
If you’re looking to set up a new franchise, or you’re thinking of buying into one, we’ve got the tools and expertise you need.
All delivered and supported by our expert, chartered certified accountants.
Payroll for Employees
Year end Accounts
MTD Compliant VAT Returns
HMRC Compliance Assured
Here at Nordens, we understand that it’s hard to make a decision without sold answers, so, in the interest of keeping you well-informed, here is a compilation of some of our more frequently asked questions regarding franchise accounting.
When a franchise agreement is made, there are two parts that can be clearly distinguished: the franchisor (the company that gives away the rights to market its product) and the franchisee (the investor that acquires the rights). Through this contract, both obligations and rights are established for both parties. The franchisor is entitled to receive payments corresponding to the right of entry and a periodic royalty agreed upon.
It also has the power:
• to control the management of trademarks and other distinctive signs;
• to demand compliance with the instructions for the operation of the business;
• to access the necessary documentation to keep proper control over sales and stock of the franchisee.
In return, the franchisor must provide the know-how, patents, supplies and all the necessary elements for the operation of the business. On the other hand, the franchisee has the right to receive the preparation and technical training required to manage the operations of the company.
Their obligations are to pay the right and royalties, maintain constant coordination with the franchisor and respect the established policies regarding quality, price and customer service, among others.
Sometimes known as a ‘business-in-a-box’, a franchise is founded upon an established model, offering products or services that have been tested in the market already. In some circumstances, the franchisor will make available instructions to help:
• with setting up, preparation and training
• with running the day-to-day business
• develop and maintain an upward trajectory
• overcome any problems
The older a franchise is, the more data there is for them to use and share. The franchisor will no doubt have lived through successful franchisees, and some not so – and consequently, they will get the chance to share these important lessons with you. From this, you should gather a few key performance indicators (KPIs) on which to focus on when handling the business. The result of which should make your life a lot easier.
Other advantages? You’ll most likely take advantage of the brand recognition right from the outset; you might acquire discounted stock, and there’ll also probably be systems in place already that make admin tasks streamlined.
Being driven along by the confidence of what makes a franchise so appealing should be cautioned by some of the varied risks associated, that aren’t encountered by running a traditional business.
• Extra start-up debt – Those hefty franchise fees upfront are sure to add to the usual start-up costs involved. As is often the case, a franchise will bring with it the burden of a larger payroll bill as well.
• Staffing from the get-go – As a franchise, the expectation will be to have a team of staff already in place, meaning you would have to manage HR and payroll. This can be an issue, seeing as many smaller businesses begin life as sole traders and grow their staff-base as they evolve.
• Added overheads – It’s not only wages that you’ll be paying, but those monthly franchise fees will need to be taken care of too. This will all add up, so be aware and clearly manage your cash flow with a keen eye, or even better – hire a firm like Nordens to look after it all for you.
• Challenging sales targets – There are a lot of franchises that make a success of offering their products or services at low costs. Traversing along this low margin / high volume business model is not always for the faint of heart, because financial positions can change fast.
Understandably, you’ll look to regulate many of these risks, and even try to eliminate some of the more pertinent ones associated with belonging to a franchise. At the same time, you should aim to make the most of the frequent advantages to being a franchisee too. This means you’ll want to figure out strategies for:
• Handling your debts
• The management of your employees
• Keeping on top of your cash flow
• Looking after your KPI’s
• How to best manage employees
Nearly all franchises are founded upon customer service. What does this mean? It means you’re going to need a staff team who won’t let you down. You’ll have to:
• Give them excellent training
• Make sure they stay motivated
• Plan their time and schedule
• Pay them on time and comply with tax requirements
Just when everything seems to be going along swimmingly, your top employee decides to take a new job elsewhere and you need to find someone else fast. Sometimes, there may not be the need. There are a number of business systems and software that automate much of the workload, such as:
• Payroll software which calculates the amount of pay and tax for all your employees. This can also fill in your tax forms automatically, and have your team paid straight into their bank accounts.
• Scheduling apps mean you can create and manage staff rotas, sharing them directly onto their mobile phones, making your employees immediately aware of when they’re next due in.
• Time-recording software clocks each specific time worked – making your pay calculations simple. Your employees can easily install the software on their phones and therefore clock into work through their device.
If you’ve got a quality franchisor, then the ingredients to success should be there in front of you. They would have shared with you the few core elements that distinguish their most effective franchisees from the others. These are what are known as the key performance indicators and may include:
• How many customers are entering the shop
• The amount of time customers are waiting to be served
• Quantities of a certain product you are selling
• The numbers of repeat customers you get
• How much you’re paying in wages, in relation to your revenue
The amount of possible KPIs can number in the hundreds, but a canny franchisor will teach you the right areas in which to focus. Get those metrics right, and your success will be all the more likely. As a result, franchise accounting and business management become a lot more straightforward.
If your franchisor isn’t able to advise on the right KPIs to action, speak to some other franchisees within the network, or check with a franchise accountant. It is vital you know exactly where your energies are going to be invested.
At Nordens, we're more than just accountants - we're business experts who can help you achieve your biggest goals.
Our specialist strategic division at Nordens boasts some of the leading entrepreneurial business minds in the country. We cater towards delivering consistent success stories, whilst helping businesses achieve above and beyond their initial goals.
Through highly-tailored guidance, coaching and advice, Nordens Strategic are able to define exactly how your business can reach new levels of success.
Regardless of how you define ‘success’ for your business, our strategic service is guaranteed to bring about real and lasting change. By partnering with some of the UK’s top business coaches, we’ll steer you along the path to a greater future.
Every business, no matter how big or small, needs to make the right decisions, and how to best manage your accounts can put huge question marks over your business. Accounting2You is here to take that pressure off and provide you with all the answers you need.
Our bookkeeping branch offers a fully inclusive, comprehensive service that you can trust. Since 2005, our specialist bookkeepers have been successfully managing the accounting of both individuals and small businesses.
With experts in payroll analysis, credit control and financial recording, Accounting2You will lead your business efficiently, and with real purpose, towards a prosperous future.
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In November 2002, having sold our other business interests off earlier in the year, I decided to set up Nordens Chartered Accountants. The easy part was knowing how to do it, as I had established and built a smaller practice a few years earlier. The difficult part, for me, was not following the traditional accountancy path. Having run businesses, both successfully and unsuccessfully, I wanted to help business owners resolve their short term problems and work with them to achieve their longer term goals. Business has always been my interest and I love that I can help business owners achieve what seems like the impossible every single working day.
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