Turnover reporting for your first franchise: rules and checks

When you expand an existing business into a franchise network, visibility over sales is no longer a given. The franchisee operates independently, but you need reliable data to calculate fees and monitor performance. Before signing your first agreement, establish how turnover will be reported: what it covers, where the data comes from, when the franchisee submits it and how discrepancies are resolved. The aim is not unlimited oversight, but a repeatable process that both parties understand in the same way.

1. First, define what counts towards reported turnover

The word ‘turnover’ alone is not precise enough. Invoices issued, payments received and revenue recognised for accounting purposes can differ in both timing and scope. If the ongoing franchise fee is linked to sales, the agreement must clearly define the basis for calculating it. This guide does not set the fee level; it explains how to substantiate the agreed calculation basis.

Prepare a short data dictionary. For each item, state what it means, its data source and when it is included in the report. Address the following specifically:

• VAT and the distinction between gross and net amounts;
• discounts, returns, cancellations and credit notes;
• advance payments and subsequent order fulfilment;
• the sale and redemption of gift vouchers;
• orders placed through delivery or other online platforms;
• online sales involving more than one outlet.

For platforms, for example, clarify whether the relevant figure is the value of the customer’s order or the payment received after commission has been deducted. For vouchers, avoid counting the same sale twice without a clear reason. For a shared online shop, specify which outlet is credited with the sale and which records support that allocation.

The contractual calculation basis does not necessarily match any single line item in the financial statements. Have a lawyer and an accountant review any differences together before signing, then test the definitions against real examples from your existing business.

2. Place the agreement within Slovenia’s legal framework

Slovenia has no dedicated franchising act, mandatory state franchise register or specific statutory franchise disclosure document. A franchise agreement is an innominate contract, meaning it is not a separately defined contract type under legislation. The general rules of the Slovenian Obligations Code (OZ) are therefore central to reporting arrangements, including the principle of good faith and fair dealing and the duty to fulfil contractual obligations.

The Companies Act (ZGD-1) is also relevant to bookkeeping and financial reporting, taking account of the rules applicable to the particular sole trader or company. Tax records and invoices must comply with tax legislation. An internal franchise report does not replace these obligations or alter the statutory requirements for recording business transactions.

A franchisor does not automatically acquire the right to inspect a franchisee’s records simply because they belong to the same franchise network. The agreement should therefore define the purpose, scope and procedure for checks. Protect commercially sensitive information in accordance with the Trade Secrets Act (ZPosS) as well.

If reports contain personal data, comply with the General Data Protection Regulation (GDPR) and Slovenia’s Personal Data Protection Act (ZVOP-2). When checking total turnover, start with aggregated data rather than customer names as a general rule. Competition law must also be considered when exchanging business data: reporting must not become a means of unlawfully coordinating the conduct of independent businesses.

3. Create a repeatable reporting process

Before bringing your first franchisee on board, develop a report template and populate it with data from your own outlet. This will show which information the system already provides and which would require manual work. Do not promise a prospective franchisee straightforward reporting if you have to compile the figures yourself from disconnected records each time.

Agree the reporting period, submission deadline, file format and the person responsible on each side. Also specify what happens if there is a technical problem and how receipt of the report will be confirmed. If you require a particular software solution, clarify the costs, access rights and data export options in advance.

A useful test is to compare three documents: the sales report exported from the system, the franchisee’s report and the fee calculation. Ask another person to calculate the fee independently using the same data. If they reach a different result, the definitions or instructions are not yet clear enough.

Do not make corrections by silently overwriting a report that has already been submitted. Retain the original version, the reason for the change, the date and the name of the person who approved the correction. This will make it possible to explain any subsequent difference between the report and the invoice.

4. Keep checks proportionate and predictable

The agreement should distinguish routine data reconciliation from a more detailed review where there are reasonable grounds to suspect a discrepancy. Specify the notice required for a review, the documents that may be inspected, the period covered and who may examine the data. For sensitive records, it may be appropriate to use an independent professional bound by a duty of confidentiality.

Agree who pays for routine reviews and the clearly defined conditions under which the cost of additional checks may be passed on to the franchisee. Do not assume that every error means sales have been concealed. First request an explanation and reconciliation, then apply contractual remedies appropriate to the nature of the breach.

For identified discrepancies, set out a procedure for collecting any shortfall or refunding an overcharge, along with the necessary corrections to documents. The same rules should work both ways: reliable reporting also protects the franchisee from being charged too much.

Practical takeaway: before launching your first franchise, prepare a data dictionary, a sample report and a checking procedure. Use data from your existing outlet to demonstrate that both parties can calculate the same result from the same records.