A franchise CPA (Certified Public Accountant) professional works closely with franchise owners and franchisors and provides franchise accounting and financial reporting services. The scope of work on a franchise business involves a set of responsibilities and risks, including preparing franchise disclosure document audits, benefit plan audits, agreed-upon procedures, and revenue recognition according to franchise industry standards.
Read on to learn how engaging a franchise CPA can be a game-changer in securing your financial future and meeting best accounting practices.
What is a Franchise CPA?
When a franchisee and franchisor enter into a business arrangement, they operate a business using an established brand, system, and internal controls in exchange for fees while adhering to specific guidelines. To ensure fees and specific guidelines are met, a franchise CPA works closely with franchise owners and franchisors to ensure they start a strong business relationship. This relationship is built on preparing clear and transparent financial statements and navigating franchisor audit requirements, among other benefits.
Benefits of Hiring a CPA with Franchise Expertise
Buying and operating a franchise business comes with responsibilities, from reviewing the franchise disclosure document to audits. An accounting professional in the field will have expertise in preparing audits relevant to the franchise business. Let’s discuss the benefits of hiring a franchise CPA:
- Provide an Accurate Franchise Disclosure Document: Also known as an FDD—the disclosure document is created and provided by franchisors to prospective franchisees to learn about the business opportunity before agreeing and signing an agreement. It’s required by the FTC’s Franchise Rule and contains 23 specific items with detailed information, including a franchise audit prepared by a franchise accounting specialist.
- Franchise Expertise: A franchise CPA understands the industry and works with franchise finances, including operational costs, royalty, advertising, transfer fees, multi-unit reporting, and compliance with franchise agreements to avoid harsh penalties.
- Internal Controls: Franchise CPAs can review internal control systems to safeguard a franchise’s assets, prevent fraud, and ensure compliance with financial and operational regulations.
- Risk Management: All franchise businesses come with financial risks, from start-up costs of the initial franchise fee to employee and overhead costs, such as royalties, wages, and property rent. During your audit, a franchise business CPA can help identify potential issues and financial and operational risks.
- Audit and Compliance Support: Franchises are often subject to audits, whether due to the franchisor agreement or regulatory authorities. An independent franchise CPA is equipped to prepare franchise audits and ensure franchises meet deadlines, such as typically 120 days after year-end.
Work with An Experienced CPA Firm
Franchise accounting experts address franchise accounting and financial reporting challenges, leading to streamlined and efficient franchise operations. At Assurance Dimensions, we have skilled professionals well-versed in franchise accounting services, helping franchisors in various industries, including restaurants, food and beverage, retail, and healthcare, giving us an extra edge.
We also understand the responsibilities under the franchisor FDD and can prepare for your next audit. Contact us today to learn more about our audit and assurance services.