INTHEBLACK June/July 2024 - Magazine - Page 44
F E AT U R E
In addition to increasing existing
requirements that franchisees seek professional
advice before entering into a franchise
agreement, the review recommends making
the Franchise Disclosure Register (FDR) more
user-friendly and creating a “one-stop-shop”
website for franchising information, based
on the Moneysmart model.
“Essentially, we think education is key,”
Schaper says.
“The costs to set up a new franchise
have increased dramatically over
the last couple of years, but we are
seeing that many franchisors have
not reviewed their pricing structure
to reflect this. They are simply
passing these increased costs on to
franchisees, without looking to see
if they can change their model to
adapt to the ‘new normal’.”
PETER KNIGHT FCPA, FRANCHISE ACCOUNTING AND TAX
CLIENT SUPPORT
READ
an INPRACTICE
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CPA Australia’s
The effectiveness
of undertaking
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or purchasing
a small business
or franchise report
44 INTHEBLACK June/July 2024
For Schaper, a key advantage of the
independent review is that it has, for
the first time, provided an accurate
overview of the size and scale of the
franchising sector in Australia.
For instance, of the 1712 franchisors
currently operating, 665 have a turnover
of less than A$10 million and fewer
than 20 staff and 30 franchisees.
“That is important to think about,
because we know small businesses have
a very strong need for support and often
turn to their accountants as a primary
source of information,” Schaper says.
Knight says accountants play a critical
role in educating franchise clients about
their duties and obligations as business
owners and directors. They can help clients
to stay on top of compliance obligations,
help them to access finance by providing
up-to-date financial statements, budgets
and cash flow forecasts, and be on hand
to answer any questions.
Sutherland believes accountants acting
for franchisees could better support their
clients by helping them to understand
the issues and concepts that affect the value
of their business at the end of its term.
“There are specific items in a disclosure
document that deal with goodwill and
whether a franchisee is entitled to goodwill
at end of term,” Sutherland says.
On the franchisor side, he adds, one
of the key areas where clients might
require assistance relates to marketing
funds and how franchisors administer
them – a common cause of conflict.
“Unfortunately, there is no audit guidance
statement for marketing funds when
there really should be,” Sutherland says.
“The Franchising Code imposes obligations
on franchisors that are not just an accounting
exercise. As a result, many audit reports are
just not helpful to franchisees, because they
relate to accounting standards rather than
compliance with the Franchising Code.”
Accountants and registered company
auditors could improve their performance
concerning audit reports and ensuring
franchisors comply with their Franchising
Code obligations, he adds. For instance,
disputes may arise about whether
a marketing fund can be used to pay
certain expenses.
“Franchisors often forget that
the Franchising Code expressly prohibits
marketing fund money being used
other than for specified things and
that the provisions in the Franchising
Code apply, despite the terms of the
franchise agreement.”
