Guides Franchise accounting, explained.
The questions a multi-unit operator asks about their books, answered in the first paragraph and shown with the arithmetic. Every figure links to the filing, the standard or the platform page it came from.
Money in
How do you reconcile DoorDash, Uber Eats and Grubhub payouts to the bank?
Start from the marketplace statement, not the bank. Book each period’s gross delivery sales as revenue, every commission, promotion and adjustment to its own expense account, and the tax the marketplace collected out of your sales. What is left is the payout, and that is the number you match to the bank deposit. Starting from the deposit hides the fees inside net sales.
How should a franchised hotel book OTA commissions: gross, net, or both?
Keep the room’s full price, the OTA’s commission and the deposit as separate figures, whichever way the OTA is paid. In the agency model the hotel collects from the guest and pays a commission; in the merchant model the OTA collects and remits a net rate. Brand fees follow your license agreement’s definition of gross rooms revenue, not the deposit, so the gross has to be recorded.
How should a studio or spa book memberships, packages and gift cards?
Money received for services not yet delivered is a liability — deferred revenue — until the member uses them. Monthly dues are earned over the month, a class pack as each session is used, a prepaid annual membership month by month, and a gift card when it is redeemed. Breakage on packs and gift cards that will never be used is recognised in step with redemptions, once you can estimate it.
Contracts and leases
What counts as gross sales for franchise royalty?
Whatever your franchise agreement’s definition says — and that definition matters more than the rate. Most start from all revenue and exclude sales tax; many also exclude refunds, discounts, gift cards when sold and third-party delivery fees; some charge on service sales only, and hotel agreements define gross room revenue their own way. Read the definition clause, then map each register category to it.
How does percentage rent work, and where is the breakpoint?
Percentage rent is an extra rent equal to a stated percentage of your sales above a breakpoint. With a natural breakpoint, the breakpoint is annual base rent divided by the percentage rate, so it moves every time base rent escalates. With an artificial breakpoint the lease states the number. Either way, the lease’s own definition of gross sales decides what counts.
ASC 842 for franchise leases: what goes in the liability, and what stays expense?
Fixed rent, rent that steps on a schedule, and rent tied to an index such as CPI (at the index level when the lease starts) go into the lease liability and right-of-use asset. Percentage rent and CAM, tax or insurance charges that vary with actual costs stay out and are expensed as incurred. The liability is the present value of the remaining fixed payments, discounted at the lease’s rate.
The close and reporting
What is a 4-4-5 calendar, and why does your royalty week end on the brand’s weekday?
A 4-4-5 calendar divides each quarter into two four-week periods and one five-week period, so every period ends on the same weekday and each compares like for like with the same period last year. Franchise systems use 4-4-5, 4-5-4 or thirteen four-week periods, and royalty is usually charged weekly for a week ending on a fixed day the brand chooses.
Why does a franchise chart of accounts have to stay comparable across locations?
Because every report that matters compares stores — the franchisor’s, the lender’s and your own — and a store P&L is only comparable if the same cost lands in the same account at every location. Many franchise agreements require the brand’s standard chart. A group with several entities also needs one code set across all of them, matched by account number rather than by name.
How should a multi-unit franchisee structure its books across entities and locations?
Keep one set of books for each legal entity, with each location as a dimension inside it, and produce the group view by combining the entities with intercompany charges eliminated. The franchisor wants store P&Ls, a lender wants the borrowing entity’s statements, and the owner wants the whole group — three reports, which should come from one ledger rather than three spreadsheets.
What does a franchisor ask a franchisee to report, and when?
Usually four things: sales every week or month for royalty and ad fund, often polled straight from the point-of-sale system; periodic P&Ls in the brand’s chart of accounts; annual financial statements within a set number of days of year end; and access to your records for audit. The franchise agreement sets each deadline, and late reports carry fees, interest or default notices.
Why must a closed day be reported as zero, and what happens when sales are restated?
A missing day and a closed day add up to the same weekly total but mean different things: one is a day nobody has accounted for, the other a day the store did not trade. Record a closed day as an explicit zero. When a day is restated after the royalty was paid, charge the difference on the next payment as its own line — never by editing what was already posted.
Start with a few stores.
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