Franchise audits: put quality control in place

Turning a business into a franchise means deciding how to check that every outlet delivers the customer experience you promise. In franchising, trust and oversight need to go hand in hand. Before offering your first franchise, establish an operational audit process that identifies shortcomings, documents what happened and guides corrective action without relying on the founder’s personal opinion.

1. Choose what really needs to be checked

An operational audit compares an outlet’s performance against predefined standards. It should not be a fault-finding visit or a general assessment of how well organised the business is. Its starting point should be the risks that could harm customers, damage the brand or disrupt operations.

Select criteria relevant to the business: safety when serving customers, product storage and preservation, service delivery, equipment maintenance and compliance with applicable obligations. A food shop and a service business will have different priorities.

For each criterion, record four elements:

• Expected standard: what should happen at the outlet.
• Verification method: observation, a document, a system record or a test.
• Evidence required: enough information to support the conclusion.
• Severity of the non-compliance: the likely consequences and urgency of action.

Avoid phrases such as “appropriate customer service” without explaining what they mean. Instead, specify observable behaviours, such as confirming the service requested and explaining the terms before the customer commits.

Distinguish critical failures from minor adjustments. A safety issue must not be obscured by a good average score for visual presentation and cleanliness. Define situations that require an immediate response, regardless of the overall score.

2. Test the consistency of assessments in your existing business

Before assessing future franchisees, apply the criteria to your existing business. The aim here is not to test the business model’s viability again, but to find out whether the audit tool produces consistent conclusions.

Ask two people to assess the same routine independently, using the same form. Then compare the results. If one passes a situation and the other fails it, the definitions, examples or guidance for assessors probably need more detail.

Also record how long it takes to gather evidence. A process that interrupts customer service for hours may be impractical once there are several outlets. Reduce duplicate checks and focus efforts on significant risks.

Example: rather than asking whether equipment is “well looked after”, check that the required maintenance records exist, inspect its observable condition and confirm that it is available for safe use in line with the applicable technical requirements.

Establish when on-site visits will be needed and when a remote check will be sufficient. Outlets with recurring non-compliance may need more frequent monitoring, provided the criteria are transparent. Keep the version of the form used: changing the benchmark without recording the change makes comparisons difficult.

3. Align oversight with the franchise offering and contract

Brazil has specific legislation governing franchising: Law No. 13,966/2019, known as the Franchise Law. Article 2 requires the Franchise Disclosure Document (Circular de Oferta de Franquia, or COF) to state what the franchisor offers and on what terms, including supervision of the network. It also requires disclosure of the circumstances in which penalties, fines or compensation apply, together with the respective amounts set out in the contract.

An audit should therefore not emerge as an unexpected obligation after signing. Describe the scope of supervision, each party’s responsibilities and the consequences of non-compliance consistently across the documentation. Have these rules reviewed by a legal adviser.

In a typical private franchise offering, the COF must be provided at least ten days before the contract or preliminary agreement is signed, or before any fee is paid to the franchisor or a person or company connected to it.

The contract should cover access to premises, required records, communication of findings and opportunities to provide clarification. Avoid turning every observation into an automatic fine: the response must follow the agreed terms and take account of the nature of the problem.

If the audit involves customers’ or employees’ personal data, also comply with Brazil’s General Personal Data Protection Law (LGPD), Law No. 13,709/2018. Limit collection to what is necessary, define access permissions and protect records. Photographing documents indiscriminately is not an appropriate way to gather evidence.

4. Complete the cycle with corrective action and follow-up checks

An audit only leads to improvement when every instance of non-compliance is followed up. The report should distinguish observed facts, unmet criteria and proposed measures, avoiding judgements about the franchisee’s personality.

For each finding, record who is responsible, the deadline, the evidence needed to confirm correction and the reassessment method. Allow the outlet to provide explanations and documents if it disagrees with the conclusion.

Also analyse the causes. If several outlets make the same mistake, the problem may lie in ambiguous guidance, unsuitable equipment or a process that is difficult to carry out. Oversight does not relieve the franchisor of the responsibility to correct its own shortcomings.

Practical application: before selling your first franchise, complete an audit of your existing business, resolve differences between assessors and follow corrective actions through to completion. Only then adopt the process as the standard for future outlets.