Quality Audits Before Franchising Your Business

When you franchise an existing business, you cannot always be there to oversee every product or service. You need to know whether essential standards are being met without relying on instinct or occasional visits. A sound quality audit process helps your franchise network protect customer trust and resolve problems before they escalate.

1. Choose what to measure based on risk

Do not turn an audit into a competition for the tidiest photograph. Prioritise failings that could harm customers, alter the service you have promised or damage the brand.

For a food business, these might include correct storage, equipment hygiene and compliance with preparation procedures. For a repair service, customer authorisation, checks before returning equipment and accurate job records may matter more.

Divide standards into three levels:

• Critical: An immediate safety risk or a serious breach of the law.
• Major: A direct impact on service quality, accuracy or consistency.
• Minor: Something that needs correcting but poses no immediate serious risk, such as poorly arranged materials.

Do not let a high overall score conceal a critical breach. A shop may look presentable while one of its processes is unsafe. This should trigger a separate decision, not merely a points deduction.

Every standard should have a clear basis: what is expected, how it will be assessed and what evidence is sufficient. Replace vague descriptions such as “good service” with specific actions that can be observed and verified.

2. Test whether the audit is fair and repeatable

Before using the audit with franchisees, ask two different assessors to inspect your own outlet using the same checklist. If their results differ substantially, the standards may be unclear or the scoring guidance inadequate.

Discuss each difference. For example, if the question is whether “the premises are clean”, one assessor might look only at the floor, while another also checks equipment storage areas. Define the scope and the evidence required so that both interpret the standard in the same way.

Create a simple checklist covering:

• the standard being assessed;
• the actual observations and date;
• evidence, such as transaction records or photographs of equipment;
• the level of risk;
• the outlet manager’s explanation; and
• the action required next.

Also set out when visits will be scheduled and when unannounced audits may take place, in line with the contract and the law. Base their frequency on risk and compliance history, not on personal relationships with the owner.

Avoid collecting names, faces or other personal information that is not needed as evidence. The aim is to verify how the business is operating, not to monitor employees’ private lives.

3. Align audit powers with the contract and the law

Before offering a franchise, ask a lawyer familiar with franchise agreements to review your rights to visit premises, inspect relevant records, require corrective action and verify compliance. A broad clause stating that you can change all the rules at any time is not enough.

The Philippines has no single comprehensive franchise law. However, a specific order applies: Executive Order No. 169, series of 2022, which sets minimum contractual requirements for covered franchise arrangements involving micro, small and medium-sized enterprises. These include the rights and obligations of both parties and a dispute resolution mechanism. It also directs the Department of Trade and Industry (DTI) to create a registry of agreements; confirm the applicable registration process with the DTI.

The Civil Code also applies to contracts, while the Intellectual Property Code governs the use of brands and the transfer of business know-how. Republic Act No. 9178 is not a franchise law; it is the law covering Barangay Micro Business Enterprises.

The contract should clarify the scope of audits, responsibility for costs, the opportunity to respond to findings and a reasonable period for corrective action. Distinguish immediate safety precautions from ordinary breaches that can be remedied.

4. Use the findings to put things right, not to intimidate

After the visit, provide an evidence-based report. Distinguish confirmed breaches from suggestions for improvement. An assessor’s personal preferences should not be treated as mandatory requirements.

For each failing, record the action required, who is responsible, the deadline and how completion will be verified. Documents may be enough to confirm a straightforward correction; a safety-related problem may require another visit.

Look for the root causes of recurring problems too. If many outlets fail at the same step, the cause may be equipment, an unrealistic standard or insufficient support from you. A failing is not always the franchisee’s fault.

Practical reminder: Before selling your first franchise, create and test a clear audit checklist. Establish a fair process for verification and corrective action—and be prepared to hold your own outlets to the same standards.