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helpful in identifying any issues including under-report- 4 Know One’s Industry and Market Share
Although one may be familiar with his/her franchise
THINGS ing or misreporting. Unfortunately, one can only see industry, they may also be involved in other industries
what the franchisee allows the franchisor to see. Since
such as restaurants, real estate, and/or home services.
most are not in the franchisees’ business daily, one is
limited to the data in a point-of-sales (POS) system, field One’s secondary industry can be larger than the franchi-
service management software, and customer relationship see industry with another set of competitors and risks/
management system or, in some cases, self-reporting. rewards, which makes it more crucial to understand the
This creates an inherent risk because any data collected market share in the industries for which one works. The
is incomplete or inaccurate. Small Business Administration provides quality resources
including data and trends, competitive analysis, and ways
3 Know One’s Franchisees to find customers. To gain a better understanding of one's
Get to know those you are connected to in business, market share, start with these metrics and update (add
and in this case, it is imperative to create relationships and/or remove) as one’s business grows:
with all franchisees to be able to analyze what their
strengths and weaknesses are. With due diligence, one • Demand: Is there a need for one’s services? What are
should learn about each franchisee and potential business customers’ income ranges and employment rates in
owners as well as their financial performance. In addition the local community or territory?
to KPIs and ways to incentivize, one should also recognize • Market Size: What is the population in a certain
the red flags that can increase risks such as under-report- mile radius? This can be dependent on your fran-
ing and misreporting or, even worse, a failing franchise. chise agreement city, state/territory, or zip code
These red flags can include, but are not limited to, late/ restrictions.
inadequate reporting, drastic changes in reporting in • Local Competitors: How many similar options are
general or seasonality, disengagement with franchisor, available in the area? Does their location versus one’s
and/or failure to meet legal and regulator compliance. location/potential location play a factor in creating a
Other red flags can include employee turnover especially successful franchise?
within a leadership role or accounting/bookkeeping. • Pricing: What are the competitors charging for
similar services/products? Is there a customer need
based on quality or efficiencies?

5 Know One’s Next Steps
How does one progress? Remember to start small and
take one step at a time. Build out current policies and-
procedures and enforce accountability by taking extreme
ownership of the success of one’s franchisees; the buck
stops here. It is also important to allow others to take
ownership of their franchise and its success by holding
each franchisee accountable to the business’s KPIs. One
must remember to allow for flexibility by tailoring poli-
cies, procedures, and KPIs to meet the overall goals.
Knowing one’s strengths and weakness will improve
the relationships with all franchisees. Franchisees will
grow your market share, but one needs to hold all in-
volved accountable in the next steps. N

The solutions a franchise needs at each stage of business
growth can be complex. Let the CPAs and advisors of
Pannell Kerr Forster of Texas, P.C. (PKF Texas) co-develop
those solutions with you. Our clients represent a cross-sec-
tion of industries, relying on us for contract compliance,
joint venture audits, financial statement audits, accounting,
business advisory, domestic/international tax services, and
more. Visit pkftexas.com.

Carlos Gomez is a contract compliance services manager at
PKF Texas. He can be reached at cgomez@pkftexas.com.

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