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If you’re a franchise advisor or field consultant, this one’s for you. If you are a leader who manages franchisee advisors, forward this to your team.
Many franchise executives across the country face the same question every year: How do we get franchisees to share their financial statements?
If your franchise agreement says they’re required to submit it, and yet you’re still spending months tracking down financial statements (or never getting them at all), you’re not alone. We constantly hear from franchisors with exactly this challenge. First attempts to collect franchisee financials yield subpar response rates, inconsistent data, endless follow-ups, and even outright resistance.
Sound familiar?
Here’s what franchisors tell us:
- They request financial statements OR tax returns. Spoiler: they get more tax returns than statements, which give very limited operational insight.
- It takes forever to get responses. Franchisees drag their feet for months or never give any at all, despite your diligent follow-up.
- It’s obviously wrong. The P&L you receive is packed with warning signs. Revenues aren’t even close to CRM or POS systems, negative gross profit, giant expenses, or missing ad fund expenses.
- Bookkeepers don’t finalize the books until Q3 or Q4. Shocker!
- Owner compensation is all over the map. LLCs vs. corporations, draws vs. payroll, officer pay lumped in with staff.
- Franchisees push back. “Can I see YOUR financials? Why should I give you mine if you won’t share yours?”
Ouch.
But here’s the good news: it doesn’t have to be this way. Even though it’s common, there are proven strategies to turn this around or to avoid the problem with good habits from day one.
This Is About Trust, Not Compliance
The real challenge isn’t just collecting financial statements, it’s establishing trust and discipline around financial reporting so it feels like partnering, not policing. When franchisees resist sharing financials, it’s often because they don’t see the value in doing so. They see it as corporate compliance, not a tool that helps them run a better business.
The best emerging franchises start with an appropriate chart of accounts and accounting system set up to head off bad accounting before it starts. They have knowledgeable business coaches that help franchisees establish an effective monthly review routine that connects the dots between key performance indicators, profitability and cash flow. Transparency goes beyond system-wide sales and KPIs to include unit profitability and financial stability.
If you didn’t start here, it’s not too late. How do you shift the culture?
Five Strategies That Work
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Start with Your Champions
Every system has a few influential franchisees who others naturally listen to, the ones who “get it.” Start with them. Get their input, test your message, and let them help lead the charge. Their endorsement will carry more weight than anything that comes from corporate.
If you have a Franchise Advisory Council or even a small Finance Sub-Committee, bring them in early. Give them ownership in shaping how this is communicated. The culture shifts quickly when franchisees start sending the message to each other.
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Lead with Purpose, Not Compliance
Make it crystal clear this is not about compliance, it is about helping everyone make smarter business decisions and drive stronger profits. The tone of this message can make or break the rollout. Try leading with: “Better data, better decisions, better profit.” Answer the question, “What’s in it for me?” and then deliver actionable insights and a process for using them.
When financial reporting helps franchisees, not just corporate, resistance softens.
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Standardize and Simplify
Require financial statements rather than tax returns to achieve operational clarity. Pair it with a simple, consistent chart of accounts and a clear submission deadline. The easier you make it, the faster the adoption. Data collection tools that map accounts to your standard can help make disparate reports consistent and support good quality control.
If franchisees are confused about how to categorize expenses or what format you need, you’ll get inconsistent data that’s difficult to analyze. Remove that friction.
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Build Trust Through Transparency
Once the first round of P&Ls is in, share anonymized benchmark results with the system. Show franchisees where the high performers are winning the profit game: revenue growth, gross margin, labor ratios, production efficiencies, and operating expenses. Celebrate those who met the deadline. Recognition goes a long way toward reinforcing positive behavior.
When you provide valuable benchmark data with training and coaching to help franchisees identify opportunities in their own business, they’ll want to have and share accurate financial information.
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Reinforce with Education
Offer a short “Know Your Numbers” session or host office hours to help owners or general managers interpret their financials. In the sessions, practice using financials and KPIs to reveal insights, share best practices and make better decisions.
Financial training is invaluable. Franchisees who understand their financial statements see them as tools for growth, not just reports they’re obligated to submit. They’re committed to having accurate, timely data and are willing to share it when they see the benefits of improved profitability – for themselves and their peers. Lifting system-wide profitability increases the value of their franchise unit.
Make It Feel Like Coaching, Not Compliance
The tone you set matters. When financial reporting feels like coaching and partnering rather than compliance, engagement, trust, and profitability all rise together. Franchisees who reap the benefits of benchmarking and fact-based decision-making become your best advocates for sharing accurate financial information.
You’re not alone in this challenge, and you don’t have to figure it out from scratch. We’ve worked with numerous franchise systems on this exact issue, and we’ve seen what works.
Speaking of Knowing Your Numbers
We’ll be at IFA this year presenting a half-day immersive workshop, Level Up Your Financial Coaching, for CFE candidates and other franchise professionals. We’ll also be hosting two Thought Leadership Roundtables on improving franchisee relationships and financial performance and hanging out at our booth #322 in the exhibit hall. If you’re tackling challenges like these in your system, stop by and say hello. We’d love to talk shop with you, franchise pro-to-franchise pro.