Every month, when our Top 2 Bottom team works with brand new franchisees, we hear the same words almost verbatim: “I wish I had known this before I got started”. The process of becoming a new franchise business owner can take quite a bit of time and a lot of expense. So there are at least three important tips for prospective franchisees to consider while getting your new business open.
#1. Track All Franchise Research Expenses at the Start: It’s not uncommon for people to consider three to five different franchise brands before the select the opportunity that’s ideal for them and their market. During this franchise research phase, it’s not uncommon to fly or drive to other cities to attend Discovery Days or Approval Days hosted by the franchisors. During the validation process you might meet with existing franchisees to ask them questions about the success of their businesses. Once you launch your business, these expenses must be included within your books. Keep all the receipts for flights, rental cars, hotel stays, fuel, dinners and so on since these were all necessary expenses in launching your brand new business.
#2. Book Your Expenses in the Proper Year: One of the first questions nearly all franchise prospects ask is “How long will it take me to open?”. While helpful answers depend greatly on each franchise opportunity, it’s not uncommon for new retail or restaurant businesses to take a year or more to actually open. That means it’s likely that you’ll have start-up expenses that span from one year into another. We always encourage our Top 2 Bottom clients to keep their accounting accurate by month, quarter and by calendar year, so tracking over the long haul will be crucial to keeping your financials sound.
#3/ Congratulations on Signing a Franchise Agreement: After you’ve done the homework, completed your validation with existing franchisees and attended the various Discovery Days, you find you’ve been awarded a franchise for a brand that you are excited to bring to your market. You sign the franchise agreement and pay the franchise fee, but things are only just beginning. You will have expenses the are affiliated with training you and your future employees. You will have expenses related to site selection and lease negotiations. Many franchisors charge a training fee in addition their franchise fee. Obviously, there will be MANY start-up purchases like equipment, electronics or vehicles to get the actual doors of your new franchise business open. Finally, you’ll likely need to pay employees during training and before your soft opening – that means state and federal tax implications for payroll. If you don’t have an accounting team, like T2B, already helping with tracking these major expenses and payroll concerns, hopefully you’ll hire someone who can oversee these time consuming accounting practices.
At Top 2 Bottom Business Solutions, we’ve become very skilled at helping both franchisors and franchisees navigate these accounting challenges. Our network of bookkeeping professionals are well versed in specific chart of accounts requirements and the demands of royalty payments and marketing or technology fees. Please visit our Franchise Accounting page today to watch testimonial videos from other franchisees who are T2B clients or join our new LinkedIn group to stay up-to-date on the latest tips and resources for accounting strategies within the franchise industry.