Setting Outlet Turnover Reporting Rules in a Franchise Agreement

Before franchising a business, owners need to ensure that outlet sales can be recorded and checked consistently. This involves more than choosing a point-of-sale system: it means agreeing on what turnover includes, when transactions are recognised and how reports are corrected. In franchising, clear rules help maintain trust by ensuring that both parties use the same basis for calculation rather than interpreting figures differently.

1. Agree on what turnover means before drafting reporting obligations

The term “monthly turnover” may seem straightforward, but it can produce different figures. Sales through delivery platforms, for example, involve the value of the customer’s order, promotional discounts, service commissions and the net amount ultimately paid into the outlet’s bank account. These figures should not automatically be treated as equivalent.

Create a transaction glossary explaining how each component is treated. At a minimum, cover:

• Sales paid for by cash, card or bank transfer, and sales through digital intermediaries.
• Discounts funded by the outlet and promotional subsidies provided by other parties.
• Order cancellations and customer refunds.
• Taxes collected, service charges and delivery fees.
• Vouchers, deposits and orders paid for before goods are handed over.

Distinguish turnover for management reporting from the basis for calculating royalties if the agreement treats them differently. Do not use the term “net sales” without explaining which deductions are permitted.

For example, a delivery platform’s net payment may already have had commission deducted. If the agreed royalty basis is sales before commission, the amount transferred cannot simply be used to calculate royalties. The point is not to set the royalty rate, but to ensure that the figure on which royalties are charged can be traced back to the underlying transactions.

2. Put the core rules in the agreement

Indonesia specifically regulates franchising through Government Regulation No. 35 of 2024 on Franchising, which replaced Government Regulation No. 42 of 2007. This framework covers, among other things, franchise eligibility criteria, offering prospectuses, franchise agreements and the Franchise Registration Certificate, known locally as the STPW.

A franchise agreement sets out the parties’ rights and obligations, as well as procedures for paying fees. As turnover reports may form the basis for those payments, the reporting mechanism should not be left entirely to informal discussions or application settings that can be changed unilaterally.

Include the definition of the calculation basis, reporting periods, submission dates, responsible parties and correction procedures in the agreement or an appendix forming part of it. Instructions for using the software can sit in an operations manual, but that manual should not quietly change the basis of payment obligations.

The regulation also requires the offering prospectus to be provided to prospective franchisees at least 14 calendar days before the agreement is signed. Use pre-contract discussions to demonstrate sample reports and calculations so that prospective partners understand the administrative workload before committing.

Do not assume that every technical reporting detail is a government-mandated requirement. Distinguish legal obligations from working arrangements that the parties design and agree themselves. Seek a legal review to ensure that reporting clauses align with the agreement as a whole.

3. Build a traceable data workflow

Identify the primary source of sales records. If you use a point-of-sale system, ensure that every sales channel feeds into it or has a clear procedure for consolidating its records. Avoid double-counting when delivery-platform orders are also entered manually by cashiers.

Set up a simple workflow: staff record transactions, the outlet manager checks the daily close, and the franchisee’s designated representative approves periodic reports. The franchisor receives the reports together with the supporting details genuinely needed.

Reconcile point-of-sale records, cash, bank transactions and settlement reports from intermediaries. Discrepancies do not necessarily mean that sales have been concealed. They may result from settlement delays, service charges, refunds or transactions recorded against the wrong date.

Also establish procedures for internet outages or times when the software is unavailable. Give temporary transaction records unique identifiers, then enter them into the system without duplicating sales. Ensure that the system records who amended a transaction and why.

Assign access rights according to responsibilities. To check turnover, a franchisor generally needs transaction data, not customers’ full identifying details. Limit the collection and sharing of personal data, and take account of Indonesia’s Law No. 27 of 2022 on Personal Data Protection if reports contain customer or employee information.

4. Prepare correction procedures before disputes arise

Reports can still contain errors after submission. Create a correction process that preserves the original report, details of the changes, supporting evidence and approval from an authorised person. Do not allow previous figures to be overwritten without an audit trail.

Agree on how discrepancies affect invoices: whether they are corrected within the same period or adjusted in the next invoice. Also specify the deadline for raising objections and the process for discussing unresolved differences. Distinguish between administrative delays, recording errors and proven manipulation; do not apply the same response to all three.

Before offering a franchise, run a reporting trial using transactions from your own outlet. Include cancellations, discounts, transactions spanning reporting periods and system disruptions. Ask someone who did not draft the rules to recalculate the results independently.

Practical step: prepare a transaction glossary, sample reports and correction procedures as a single package. If two people produce different figures from the same transactions, clarify the rules before using them with franchise partners.