Franchising your business: organising quality audits

Turning an existing business into a franchise network means maintaining a consistent customer promise, even when each outlet belongs to an independent entrepreneur. Quality audits help check that consistency. But first, you need to define what you will check, how you will measure it and how you will address any shortcomings. Here is how to put this framework in place before signing your first franchise agreements.

1. Define a legitimate scope for your audits

A quality audit is not about checking everything that happens in a franchisee’s business. It covers the commitments needed to deliver the franchise concept: the presentation of the premises, compliance with service standards, adherence to essential procedures and the provision of customer information.

Start by identifying situations that could directly undermine your brand’s customer promise. For each one, specify an observable criterion and readily available evidence. For example, replace “satisfactory welcome” with “every customer entering the premises is attended to in accordance with the applicable welcome procedure”.

Distinguish between three categories:

• Regulatory requirements applicable to the business, where internal checks never replace inspections by the relevant authorities.
• Contractual requirements of the franchise concept, which the franchisee must meet.
• Recommendations for improvement, which must not be artificially turned into enforceable obligations carrying penalties.

This distinction protects the relationship. An auditor’s personal preference does not constitute a breach. Every finding of non-compliance must be linked to an identified requirement that the franchisee knows about and that applies to their outlet.

2. Make provision for audits within the French contractual framework

France has no single statutory regime governing franchise agreements in their entirety. They are subject, in particular, to general contract law and competition law. Pre-contractual disclosure is, however, governed by Article L. 330-3 of the French Commercial Code, introduced by the Doubin Law of 31 December 1989, where its conditions apply: making a trade name, trade mark or trading identity available in return for an exclusive or near-exclusive commitment in relation to the business activity.

The pre-contractual disclosure document, whose contents are specified in Article R. 330-1, and the draft agreement must then be supplied at least twenty days before the agreement is signed or, where applicable, before any required advance payment is made. Prospective franchisees must therefore be able to review the contractual audit arrangements before committing themselves.

Have the agreement set out the essential audit arrangements: purpose, frequency where relevant, notice periods, circumstances permitting an unannounced visit, documents that may be accessed, confidentiality, costs and the procedure for addressing non-compliance. A clause allowing “any inspection at any time” leaves too much room for disagreement.

The franchisee remains an independent entrepreneur. The auditor checks that the franchise concept is being implemented; their role is not to direct the franchisee’s employees day to day or take over management decisions. Have the clauses reviewed by a lawyer with franchise expertise.

3. Test a concise, repeatable checklist

Use your existing outlet to test the checklist before rolling it out. The aim is not to demonstrate that the outlet is exemplary, but to check that two assessors reach comparable findings.

For each item checked, record:

• the reference for the requirement;
• the verification method: observation, document review or interview;
• the result: compliant, non-compliant or not applicable;
• the evidence and the manager’s comments;
• the severity of any non-compliance.

Do not let a favourable overall score conceal a critical problem. A failing that poses an immediate safety risk must be dealt with separately from a minor issue with presentation. Define severity levels before the first visits, rather than when a dispute arises.

Also measure the time required and the disruption to operations. If every audit takes up a large amount of the manager’s time without producing useful decisions, simplify the checklist.

Finally, limit the personal data collected. A photograph taken as evidence of compliance should not unnecessarily include customers, employees or contact details. Where personal data is processed, its collection, access and retention must comply with the GDPR.

4. Turn findings into verifiable corrective actions

End each visit with a discussion that gives the franchisee an opportunity to respond: present the facts, gather explanations and distinguish disputed points from agreed findings. Then send a dated report, allowing the franchisee time to submit comments.

For each corrective action, specify who is responsible, a deadline appropriate to the severity of the issue and the evidence required to confirm completion. Documentary evidence may be sufficient for some issues; others will require another visit. Also set out how the matter will be formally closed.

Do not confuse an audit with automatic penalties. The consequences of a breach must be assessed in light of the agreement, its seriousness and the applicable rules. An issue recurring across several outlets may also reveal an ambiguous instruction or a requirement that is difficult to put into practice: consider this possibility before repeatedly attributing fault to franchisees.

Key takeaway: before franchising, test an objective checklist, ensure the agreement sets clear boundaries for audits and establish a follow-up process that allows franchisees to respond. A good audit makes requirements clear and corrective actions verifiable, without taking over the running of the franchisee’s business.