When you launch a business, it’s imperative to have a good team of vendor partners to rely on, and your accountant is near the top of the list. However, the accounting needs of a franchisor or franchisee are a little different than those of other business owners.

Franchise businesses must take into account things like Item 19 reporting, royalty collection, marketing fees, and multi-unit economics.

Franchisor Accounting

Franchisors are responsible for the overall financial health of the brand. This means they have to have a very clear picture of individual franchisee’s finances.

For franchisors, timely access to franchisee financials presents the opportunity to understand top-performing trends and best practices. This also enables franchisors to provide guidance and insight to support the growth and success of their franchise community. Accounting analytics and benchmarking can be used by franchisors to gain important insights like seeing how different stores costs vary.

For franchisors, perhaps the number one reason they need an accountant is to compile profit/loss data for the Franchise Disclosure Document’s Item 19. Item 19 is the franchisor’s opportunity to make oral or written representations about the financial performance of their business and the average net profit of their franchise community. Accuracy and consistency are critical to establishing trust and transparency in the sale process to new franchisees.

“In addition to bolstering franchisee success, timely financial insight helps franchisors answer the number one question asked by prospective franchisees: “How much money will I make?” said Arlin Owsley, Senoir Vice President with Xendoo, a franchise accounting firm.

Franchisee Accounting

As a business owner you have many hats to wear, but struggling over the books shouldn’t be one of them. Taking the do-it-yourself accounting approach takes away from time that could be spent on core business activities that could grow your franchise. It also runs the risk that a mistake could be made, or cost saving deductions missed.

Traditional vs. Tech-based Accounting

In the past a franchisor or franchisee would have hired a traditional CPA or bookkeeper, but are finding that today the accounting industry is falling behind from a technology standpoint and can’t deliver reports in the timely manner digital-based accounting solutions can.

Traditional bookkeepers and accountants aren’t able to connect digitally to your POS and payroll systems to make routine accounting seamless the way many digital solutions like Xendoo, Pilot and Bench can.

“Our industry leading proprietary platform integrates with Xero and QuickBooks accounting software – delivering 24/7 visibility to trends, KPIs, and overall financial health,” said Owsley. “Other integrations include: Gusto for payroll, Bill.com for AR/AP, and A2X for ecommerce sellers.”

By pairing cutting-edge software with expert support, cloud-based accounting provides franchises with accurate, up-to-date financial data.

With the year drawing close, now is the time to work with a franchise accounting partner to maximize your deductions and to start planning a tax strategy for 2023.


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