"As the legal counsel to over 60 franchisors, I know how critical it is to the ultimate success of a franchisor to collect all of their royalties. Your specialty of royalty auditing exclusively for the franchisor, is just what the doctor ordered. Barry's experience as the CFO of franchisors Arthur Treacher's Fish and Chips, Pudgies Famous Chicken and Wall Street adds to your unique qualifications. I have and will continue to recommend you to my clients."
Harold Kestenbaum, Esquire
Ruskin, Moscou Falticheck
Why Audit?
Are you receiving full royalties under the terms of your franchise agreement?
The most effective way to optimize royalty revenue is through an ongoing program of franchisee audits. If royalty fees are an important source of revenue, ask yourself the following:
- Have you reviewed the terms of your franchise agreement recently?
- Do you receive the full amount due from all of your franchisees?
- Are your franchisees reporting accurately despite ongoing changes such as staff turnover and new software?
- Does your honor royalty reporting system include the possibility of audit?
- How much would a modest increase in collected royalties increase your bottom line?
Royalty Recovery Group identifies and collects royalty and licensing fees lost due to erroneous sales reporting. Since we're an independent service, the audit is performed by a third party – helping you preserve your critical relationships with your franchisees.
Over the past decade an increasing number of companies have made the decision to outsource non-core business functions in order to concentrate on their core competency. Outsourcing is growing at an annual rate of 35%. Management guru and author Tom Peters defined this trend best when he proclaimed, "Do what you do best and outsource the rest."
Royalty audits are a wise business practice and, if you follow our recommendation to notify all of your franchisees that you are commencing a program of periodic audits, will not be interpreted by the franchisee as an accusation. You should mention that audits are common in the franchise industry. It is our experience that if a franchisee is insulted by an audit, it is likely due to the fact that they have something to hide.
Many companies are hesitant to conduct audits because they do not believe that the audit will be worth it. In the majority of audits the franchisee pays the audit fee due to errors uncovered as a result of the audit. Royalties can be underreported for a variety of reasons, some of which can be completely innocent. Some of the causes of underreporting include:
- Staff turnover
- Computer programming errors
- Fraud by franchisee
- New computer software
- Misinterpretation of the terms of the franchisee agreement
- Theft by franchisee employees