Q: I would like to consult with you regarding franchise laws/regulations. Are franchise buyers entitled to withhold reports such as monthly or sales reports from their franchisors? Are there any rights or privacy clauses that are being violated?
Thank you very much!
-Miki, via e-mail
A: Franchising is founded on the basic premise of a partnership between the Franchisor and the Franchisee. The former is there to provide support with the proven systems. The Franchisee, on the other hand, is there to ensure the brand as well as the products are synchronized.
There are no franchise laws in our country yet. However, Franchise Agreements normally have clauses that specify submission of financial reports both monthly and yearly. If you are the franchisor, you can include submission of financial reports as part of your Franchise Agreement.
Also, you can use persuasion by showing to your franchisees the advantages of submitting financial reports, such as providing them with an analysis of financial reports, and so on. Franchisees will of course, want assistance in interpreting their financial reports.
If you are the franchisee, you should know that withholding information from your franchisor will also be to your disadvantage. For one, your franchisor will not know whether your food cost, for example, is within the system-wide standards. In which case, your franchisor will also not be able to recommend ways by which you can monitor and control your costs.
In a franchisor-franchisee relationship, both parties should have complete trust in each other, including knowing the real sales and profit figures.
Armando "Butz" O. Bartolome is currently President of GMB Franchise Developers, the pioneer franchise development company in the country and is behind the growth and expansion of over 200 local companies. You may reach him at firstname.lastname@example.org.