Franchisors are subject to strict financial disclosure rules under the FTC Franchise Rule. This Rule requires audited financial statements to be included as part of the Franchise Disclosure Document (FDD). Adhering to these requirements is crucial for maintaining franchisee trust and ensuring compliance with relevant rules and regulations. Because this rule can be complex, it’s often in a franchise company’s best interest to partner with an experienced franchise accounting firm.
Let’s explore how experienced franchise accounting services assist owners in navigating regulatory compliance with expert guidance.
What Do Franchise Accounting Firms Do?
Franchise accounting firms specialize in auditing the financial records and disclosures required of franchisors. Unlike other industries, franchises are more complex, often consisting of multi-unit operations. This complexity makes auditing challenging.
Franchisors must adhere to the FTC Franchise Rules—specifically Item 21 of the FDD. Item 21 requires franchises to submit audited statements, including:
- Balance sheets
- Multi-year income statements
- Cash flow statements
These documents must be reviewed by a third-party accountant following Generally Accepted Accounting Principles (GAAP).
In addition to financial statement preparation, franchise accounting services often include bookkeeping, payroll processing, tax planning, and year-round accounting and tax support, ensuring the franchise stays compliant and financially healthy.
Benefits of Working with Franchise Accounting Firms
Franchise accounting firms assist franchisors in preparing for FDD filing. They conduct audits of their records to ensure compliance with the Rule.
Here are three benefits of working with an experienced accounting firm trusted by franchise owners.
1. Enhanced Compliance and Reporting
The most significant benefit of using a franchise accounting firm is regulatory compliance.
The FTC Franchise Rule, Item 21, and state-specific filing standards are complex and require careful attention to detail. Working with an accounting firm that has experience and understands the technical jargon ensures your audit will withstand scrutiny.
On the other hand, contracting with general accounting firms—firms without the experience to guide a franchise through an audit—invites the risk of delays or errors. This results in red flags during legal review, FDD rejections, or worse, fines.
2. Efficient Audit Process and Fewer Surprises
Matthew “Matt” C. McNamara, CPA, CISA, Chief Executive Officer at AD Advisors, LLC, and Partner at Assurance Dimensions, LLC, said, “Franchise accounting has specific 606 requirements as well as financial reporting specific requirements that must be addressed.”
Because franchises have complex financial structures, franchise accounting firms must know how to navigate audits and requirements quickly and accurately.
Assurance Dimensions offers clear timelines and step-by-step guidance. This hands-on support helps franchisors avoid costly miscommunications and reduces the number of revisions, leading to a cleaner, more efficient audit process.
3. Franchise-Specific Financial Advisory Services
Audits are often necessary for expansion and business growth. An experienced franchise auditor can help present data to represent a franchise’s growth story accurately. These insights help shape and tell your brand’s story to prospective franchisees, investors, and state regulators.
Assurance Dimensions provides tailored audit guidance. That includes tax planning, filing support across state lines, and aligning your FDD timeline with key business milestones.
Our accounting team becomes more than your audit firm. We become your trusted advisors, especially for growth-minded franchisors eyeing their next phase.
Top Accounting Services for the Franchise Industry
Partnering with an inexperienced firm opens the door for legal woes and hefty fines. However, working with a franchise accounting team offers several clear advantages, including enhanced reporting, increased efficiency, and trusted advice.
Whether you’re submitting your FDD or filing for a renewal, Assurance Dimensions is here to help. We bring offers clarity and confidence to every step of the audit process.
Contact us today to learn more about our assurance and accounting services.
