Royalty Assurance

Franchise organizations lose multiple millions of dollars a year through underreported sales.  Underreported sales occur as a result of willful and intentional acts of fraud by franchise owners, neglectful store operations, and employee theft. Executives leading franchise organizations have the responsibility to ensure that all sales are reported accurately, store operations standards are maintained, and marketing fund contributions are maximized.

We have observed that franchise organizations that do not have an effective Royalty Assurance program in place to monitor and test their franchise owners’ reported sales, were losing as much as 20% of their royalty and advertising income. We believe the primary objective of the Royalty Assurance Program is to determine if net sales are being reported accurately, royalty and advertising fees are remitted correctly, food invoices are within appropriate cost percentages and if the franchise owners are in compliance with the policies and procedures set forth in the Franchise Agreement.

HOW WE CAN HELP:

The Mershimer Group understands that improving sales reporting integrity and related royalties means more revenue for advertising and marketing, and results in increased franchise opportunities and owner wealth. By analyzing sales and raw material records, we are able to identify low performing units.  These units become “targets” of store visits, audits, investigations, and mystery shops until the source of the poor performance is identified. If intentional underreporting is discovered, we will document and present an actionable evidence portfolio that will allow the company to take legal action meant to remove the franchise owner from the system, and to make a claim for recovering lost revenue, and expenses.

The Mershimer Group will build and implement a Royalty Assurance program specific to an organization’s needs.  Programs consist of services that create an atmosphere of sales reporting integrity and employee honesty. Ultimately, we provide solutions and products which help our clients reduce losses, thereby reaching their revenue and profit goals. We do not simply hand the client a list of things to do and leave them to do it. Typically, our program involves the following components:

• Work with client to determine metrics for identifying potential underreporting issues, as well as to determine the magnitude of underreporting occurring. We calculate the current amount of loss and set goals for improvement. 
   
• Franchise agreement review and feedback on royalty assurance language. 
   
• To develop a high impact program based on deterring underreporting, we generally focus on the worst offenders as determined through the yield or other metrics. 
   
• Audits, Mystery Shops, communication of results and impact, regular deterrent and awareness visits at target stores, development and documentation of underreporting case, and meeting with underreporters and their attorneys to explain evidence gathered, and to discuss next steps.