Franchisee Red Flag: unpaid government remittances
When a franchisee experiences cash flow challenges, unpaid government remittances are often one of the first signs of trouble. For franchisees struggling with cash flow, there’s temptation for example, to use 5% GST/HST payments to fund other priorities – especially because it might be several months before a government representative contacts a franchisee to specifically request unpaid remittances. Once a franchisee delays remittances, however, franchisor payments such as royalties and advertising often follow.
To anticipate cash flow issues, on a quarterly basis collect from your franchisees copies of government remittances, including GST/HST, PST and all employee payroll source deductions.
Follow up immediately with any franchisees that are late submitting these documents as timely remedial strategies may be necessary to address cash flow problems.
Comparing franchisee performance also enables you to identify stronger franchisees or groups of franchisees and the reasons for their success. This information can help to guide the franchise system toward improved results.
