Franchising can be a powerful way to grow your business, but it’s far from straightforward. Whether you’re considering franchising your business or are already managing a network of franchisees, the financial and operational complexities require careful navigation. That’s why having the right franchise accountants on your side is crucial.
In the podcast titled “Diving into franchising: systems, growth and accounting essentials”, industry experts Phil and Lucas break down the realities of franchising, covering everything from revenue streams and management fees to tax implications and international expansion. If you haven’t seen it yet, you can check it out here: Watch the full podcast.
Franchising: More Than Just a Revenue Model
As Phil and Lucas discuss, franchising initially generates very little revenue for the franchisor. With just a couple of franchisees paying royalties – often around 5% of their sales – the franchisor’s income might be too low to cover ongoing expenses. This is where expert financial planning and management come into play, ensuring the franchisor has a solid structure in place before scaling.
It’s not just about royalties. Franchise accountants help you navigate the various income streams: management fees, marketing fees, technology fees, and even product supply margins. Each of these revenue sources comes with different cost structures and tax implications, which, if not properly managed, can eat into your profits.
The Importance of Detailed Financial Planning
Phil emphasises the importance of working through detailed financial plans with the help of franchise accountants. This planning helps answer critical questions like: How do you cover your operating costs before the franchisor income really takes off? What are the hidden costs of supporting franchisees? How do you price fees ethically and transparently?
For example, technology fees might seem like easy additional income, but the associated costs of CRM systems, user licenses, and ongoing tech support can add up quickly. Marketing fees, meanwhile, must fund genuine marketing efforts rather than being a disguised revenue stream. The accountants help you separate the profit from the expense, ensuring long-term viability.
Managing Tax and Legal Complexities
Franchise accountants are indispensable when it comes to understanding the tax landscape. Different revenue streams may be taxed differently, and expanding internationally adds further layers of complexity with varying local laws and regulations.
In the podcast, Lucas highlights how corporate tax, VAT, and capital gains tax all require careful consideration when franchising. The right accountant can also advise on company structures, such as forming separate limited companies for franchisor and franchisees, to optimise tax efficiency and compliance.
Supporting Franchise Growth and Performance
Beyond the numbers, franchising is about replicable systems and strong support for franchisees. The podcast discusses how managing and coaching franchisees is essential to driving their – and your – success. Franchise accountants play a role here by providing financial reports and insights that help franchisors understand franchisee performance and make informed decisions on support and growth strategies.
Planning for International Expansion
One of the exciting opportunities for franchisors is taking their brand global. However, as Phil notes, operating internationally requires tailored franchise agreements and structures, often using master franchises to delegate control while maintaining revenue streams.
The podcast covers how franchise accountants work alongside legal and business consultants to navigate international laws and tax obligations, ensuring the franchisor remains compliant and profitable across borders.
Why You Should Watch the Full Podcast
If you want a comprehensive look at the ins and outs of franchising, especially the financial and accounting essentials, our YouTube video podcast with Phil and Lucas is a must-watch. It’s packed with real-world advice, practical examples, and honest discussion about the challenges and rewards of franchising.
Franchising your business offers tremendous growth potential but demands expert financial oversight. Franchise accountants are key to managing multiple revenue streams, ensuring tax compliance, planning expansion, and ultimately supporting your franchisees for success.
Whether you’re just starting out or scaling internationally, don’t underestimate the value of specialised accounting expertise. And to get a deeper dive into these topics, be sure to watch the full podcast with Phil and Lucas.
