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How Do Franchises Keep Track of Franchisees' Revenue?

Forza

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In a nutshell, how do franchises, such as business coaching ones, monitor each franchisee's revenue from which their weekly/monthly franchise fees are based on?

Shop franchises can keep track of till sales, although that's subject to some fiddling if there's no stock management system. But it seems as though a business coaching franchisee can simply take cash and not declare it every single time.
 
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Forza

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Even with audits, stuffing of pockets must happen to some extent.
 

FiGuy

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Even with audits, stuffing of pockets must happen to some extent.

Stuffing of pockets will always happen to some extent with those willing to do it.

They can and will look at tax returns (because you likely signed this away as part of the agreement). And the truth is, if you are skimming on taxes you can have a potentially larger issue at hand.

Most quality auditors will sniff out any big grabs but not all the little ones. Even in that case, most franchises know from a large enough group there will be some skimming and it is usually already factored in with the royalty structure (e.g. we know 1-5% will skim therefore we factor in an additional .50% to royalty costs across the board).
 
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Kung Fu Steve

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Is every single dollar accounted for? Probably not. There is a major difference in hiding thousands of dollar and missing the occasional $1.99 trinket.

We all make mistakes so it is pretty grey area.

I venture to say that audits are for the people who are running the business into the ground instead of the ones who miss a couple hundred bucks throughout the year. Money laundering is a serious offense of course but barring any mafia-isk business fronts the more common theme is people rolling personal debt into the business. That will sink a ship very fast.
 

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