Learn about Franchise Audits & best practices, how to conduct audits, follow food safety, manage remote audits - with tips, tricks & real-life examples.
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Imagine you are a franchisor looking at adding a franchisee to your portfolio. Typically, these are the steps followed.
Prescreen new franchise. ✅
Share brand style guide. ✅
Share standards and document training manual. ✅
When partnering with a franchisee, all the above boxes must be checked, but franchisors need to do more for their business to survive and thrive. While franchisors choose their franchisees carefully, they must check on them periodically to ensure that standards are followed and that their reputation is not tarnished by unprofessional behavior. Doing this from the outset will reduce many sleepless nights.
Franchisees, however, often find the process of notifying them of audits difficult because it violates their values of cooperative business relationships with franchisees. An audit initiative that is targeted, communicated, and executed well can address many of these concerns.
Let’s first look at what a compliance audit involves. It is an independent evaluation that ensures that an organization adheres to laws, regulations, policies, and procedures, whether they are laws, rules, or regulations. Also, they provide insight into whether a company is compliant with agreements. Most people are familiar with financial audits, like those of public companies through the Sarbanes-Oxley Act (SOX) or of individuals and corporations done by the Internal Revenue Service (IRS).
Compliance audits, however, aren't just financial. They include IT or other security issues, HR compliance, quality management systems, and other areas. All formally registered companies and organizations in the US are bound by federal and state laws, which govern non-discriminatory employment, good health and safety conditions, and secure financial transactions. Broadly speaking risk-based legal compliance audits aim to:
Keeping up with legal compliance is essential to staying compliant and maintaining the integrity of your organization company's mission. Among the benefits of maintaining regular compliance audits are:
Types of Compliance Audits
The requirements for legal compliance audits vary by industry. However, the following legal concerns are the most common:
Performance: In auditing the bottom line of the franchisee's business, many other elements become important - whether the franchisee is providing the franchisor with the necessary reporting regularly, like a monthly profit and loss statement, budgets, etc, and whether this is done on a timely basis. Performance audits should dig deeper into the engagement of franchisees within the franchise system by examining whether they attend meetings and conferences and if they send team members to franchisor-facilitated training programs.
Product: This includes:
Promotion: Franchisees should be provided with a corporate style guide that details what they can and cannot do with brand elements, what type of social media they can use, etc. It is important to mention uniforms and other standards that franchisees and their employees must adhere to.
Premises: An organization's shopfront, office, and even vehicles are how the public perceives it. For long-term success, it is critical that these standards are always met. This involves auditing the premises for cleanliness, accessibility, health, and safety obligations, and ensuring equipment is maintained properly.
People: Franchisees within a franchise network may be held liable for breaches of the Fair Work Act. Therefore, franchisors need to ensure their franchisees are doing the right thing by their employees. It is important to check if:
Audits of Specific Industries
Laws vary by type and state and compliance audit checklists include priorities and areas of focus specific to an industry, state, or type of company. Audits can also be external or internal. While some audits are mandatory, others are voluntary and recommended for preventing future non-compliance. Here’s a broad overview of the focus areas of compliance audits across five major industries:
Retailers face high turnover and inconsistent practices across locations as top compliance challenges. Maintaining consistency across dozens or hundreds of stores can be difficult. Noncompliance can damage a company's reputation and growth prospects if it directly affects customers and employees. This is where retail compliance audits help as they maintain everyone's understanding of workplace standards, whether it's merchandising, shelving, or displays. A well-conducted audit leads to:
Compliance in retail refers to a brand's or a store's adherence to corporate, legislative, and/or regulatory guidelines. Displays, promotional signage, layout, cleanliness, and safety procedures are all considered as part of store compliance. Directives from a specific brand, such as display instructions, are part of brand compliance. For retail compliance, the focus of audits is on:
Target Corp. discovered this in 2020 when it was cited for OSHA violations across eight stores for issues ranging from blocked emergency exit access, storage hazards, and worker safety. To resolve the cases, Target had to pay $464K in penalties and upgrade store safety.
Managing these tasks manually can be time-consuming and stressful and that’s why retailers turn to online platforms for help. The Delightree app for instance keeps track of daily and weekly store tasks across locations, cleanliness, equipment maintenance, to even training modules and storing resources like FAQs & videos.
Daycare centers might seem like the business of a lifetime for those who love children, but running one efficiently involves more than knowing how to manage children. Childcare centers are regulated by state and federal laws, and there are applicable state and federal employment laws. Franchise owners are always looking for ways to streamline operations in order to keep up with the ever-increasing competition and be successful in the rapidly evolving childcare market.
The role of compliance audits is helping franchisors ensure that standards are met and care is taken to mitigate incidents like playground accidents, food safety, and careless handling by daycare minders. Some of the key areas daycare audits focus on are:
Keeping such a high level of compliance requires regular monitoring of best practice standards. Platforms like 1Place Childcare come in handy here. 1Place Childcare's time and date stamped photos help new employees understand your goals, while the smart workflows provide links that help support a question with video tutorials, information links, or images. Watch the video for more details:
About one in six Americans contract a foodborne illness every year, with 3,000 people dying according to a report by the Centers for Disease Control. That's why food safety violations hog the attention of the media as well as the F&B industry. In 2021, the market for food safety testing is estimated at $19.5 billion. By 2026, it is expected to reach $28.6 billion.
Concerns about food safety have grown during these unprecedented times. The COVID-19 outbreak has put enormous challenges on food supply chains with bottlenecks in sourcing labor, processing, transport, and logistics. There’s simply no room for error when it comes to sourcing and storing food, or keeping surfaces and utensils clean.
The Food Safety Modernization (FSMA) Act regards food safety to be primarily the responsibility of the food industry. As part of its role, the Food and Drug Administration (FDA) establishes strong, risk-based food safety standards and oversees the food industry to ensure it meets these standards. Regular food safety audits help with the following:
Eliminate Risks with Food Safety Audits
There are multiple stages in food production and it's possible that a product could become contaminated during any one of these stages and harm end consumers. Retailers, restaurants, and other operators rely on food safety audits to eliminate these risks in these ways:
Benefits of a Food Safety Audit
Reasons to Conduct a Food Safety Audit
Audits of food safety are conducted for many reasons.
Audits Based on Standards
Increasing globalization and complexity have increased the need for standardized, internationally accepted food safety plans. GFSI (Global Food Safety Initiative) is an international committee that has developed a system for benchmarking food safety schemes. Standards-based audits have many advantages like:
Food Safety Audit are of 3 types
Audits are chosen based on resource and cost considerations. Adopting a technology platform can make the auditing process much easier. FoodLogiq is a cloud platform that streamlines and automates supplier documentation and verifications and centralizes records to ensure compliance with the FSMA requirements.
Regardless of first, second, or third-party, the food audit safety journey has five steps:
1. Planning: Clearly defining the objective of an audit is crucial. Based on this there are three types of food safety audits:
2. Execution: Ensuring a systematic and thorough food safety audit is important as it:
3. Corrective Action: Documenting information with descriptions is important to ensure:
4. Verification: This looks into how effective corrective actions are. Some steps to make this effective are:
5. Audit Evaluation: Auditing the audit process is recommended for the following reasons:
Internal Audits Matter
A food manufacturing facility must also conduct periodic inspections of its food safety systems. This is why internal audits, conducted by the company's trained personnel who objectively assess different departments, functions, and processes, are important. The following steps are involved:
The Delightree app makes internal audits painless and less stressful as it allows this to be managed remotely across multiple locations.
There are different ways of conducting internal audits and documenting them. Here’s a look at each approach.
Customized Checklist Setup
Customized internal audit checklists vary according to facility types, but there are some broad items common to every facility, like:
Dave Thomas, the founder of international fast-food chain Wendy's International, Inc, has many quotable quotes to his credit, but there’s one that best captures his personal and business philosophy. Thomas, who opened the first Wendy's restaurant in 1969, said, "You earn your reputation by the things you do every minute of the day." He established a corporate culture that prioritized quality as a key element of Wendy's restaurants.
Many things have contributed to Wendy's consistently stellar reputation, which includes a strong food safety component supervised by the Quality Assurance department, which operated independently within the organization reporting directly to senior management. The department has three primary responsibilities:
Wendy's food safety practices are ingrained in its DNA in many ways, including:
Now let’s take a look at what goes into ensuring franchisee compliance with food safety standards. Given the heightened focus on food safety after the pandemic, the most recent relates to the FDA checklist for restaurants that are reopening. Many companies have launched specific tools to help restaurants ensure they are keeping their food safe in the post-pandemic world. Like North Carolina-based Steritech which has launched a Critical Food Safety Check tool to coach restaurant operators on safety standards that are of high priority. With a virtual version of the tool, operators can navigate food safety and safe service without facing a physical audit.
Food safety inspection: This evaluates the food safety practices and hygiene of a food establishment and ensures that food-related activities are conducted according to set standards. It involves:
HACCP food safety standards: Each chain's HACCP plan outlines certain monitoring procedures. Instead of relying on product testing and inspection for food safety, HACCP focuses on preventing contamination and hazards before they happen by evaluating if:
Kitchen hygiene audits: Food ingredients are monitored as well as the food served to customers. This involves many aspects:
Cleanliness: This is the most important aspect of kitchen hygiene.
Maintenance: This covers the following areas:
Storage: There are three storage areas: non-food, cold, and dry. The audits evaluate:
Personal Hygiene: Commonly observed factors are:
Food quality assurance: This aims to create an environment which ensures the food product being prepared will meet all its quality requirements. This typically involves a defined cycle called the PDCA - plan, do, check, and act.
Sanitation audits: Apart from examining records, the audit involves visual observations.
Mystery Audits: Mystery audits are also used by many franchisors to assess compliance with brand standards. This is typically done by employing a mystery shopper, also known as an anonymous evaluator. There are mystery shopping agencies like SeeLevel HX that assess compliance across locations by assessing the following:
Ultimately, food safety audits are crucial to a brand's integrity and long-term success. The spotlight on food hygiene and safety has increased after Covid-19 and regular audits are an effective way to ensure consistently high standards are maintained. This can be done easily and effectively with a mobile phone platform like Delightree which is enabling many brands to better manage their operational and quality processes. The insights gained from these audits can help formulate specific, well-planned, and executed actions that can transform your business.
A successful franchised business is an outcome of the ability with which a franchise system and the franchisees fulfill the important responsibilities placed on them. For a franchise system, the responsibilities mainly revolve around:
A franchisee’s responsibilities comprise:
If one party fails to effectively perform its responsibilities, a franchise system is bound to collapse.
Take the case of Sbarro for example. Founded in 1956 by Italian immigrants Gennaro and Carmela Sbarro in Brooklyn, Sbarro Pizza filed for bankruptcy in early 2014 (twice within three years). Sbarro had 800 restaurants of which about 600 were franchised locations. As they expanded, they failed to maintain their food quality, leading to bankruptcy eventually.
Therefore, it is important that a franchisee keenly observes how the franchisor runs the system to ensure that proper investments are being made into the concept and that the concept is being properly run and promoted.
Similarly, franchise systems should closely monitor their franchisees for system compliance to ensure brand protection. Compliance with operational and store appearance standards is one part of what the system must monitor. We have already discussed in detail various aspects that need to be audited from a compliance and audit perspective.
Audits effectively monitor franchisee compliance and are an integral process of running a successful franchise business. A ‘franchise consultant’ plays an important role in the success of a franchise business by ensuring all compliances are in place. Following these best practices when conducting a franchise field audit will ensure that franchisors perceive auditors and franchise consultants as friends and not foes.
Keep it simple, eliminate redundancy and keep the questions clear and crisp
The response should be quantifiable, actionable, and relevant
Be mindful of the audit flow and length
Include references and tag questions with relevant documentation and processes
Mark core processes as critical
Set a corrective action plan for failures and clearly define the person responsible
Review processes and standards with an intent to resolve failure at an organizational level
Be assertive and not dominant
All auditors adhere to the same standards
Develop a photostream of the key important standards
Define and implement an approval process to prevent a backlog
Ensure regular visits at all franchise locations
The underlying principle of all these best practices is to re-visit processes and standards from time to time and implement changes as and when required. Effective change management and implementation, following these best practices internally is the key to ace audits and run a successful franchise system.
Historically, humans have been adaptable to change. In the pre-covid era, the only way we managed audits and reviews was in person. However, COVID-19 hit hard in 2020, and boom. The world changed beyond what any one of us could fathom. We were forced to confine ourselves to our homes. With countries going into lockdowns and the fear of the virus looming, getting back to business became a challenge for most businesses including global franchises like McDonald’s, KFC, Chipotle, and the likes even when things started to open up gradually. Modern-day technology and the internet had a big role to play for businesses to continue as usual. It also brought to fore many benefits of remote working. To win back customers and ensure COVID safety became a huge challenge. Business owners were quick to realize that “audit and compliance” were now more important than ever before. However, owing to the pandemic weekly in-store audits were not a possibility. Innovators like Delightree were quick to come up with digital platforms to conduct remote store visits.
But first, let’s delve into store audits and their importance for a business.
Store audit refers to a detailed inspection that examines everything from a store’s visual merchandising to sales to inventory levels. The purpose of doing these audits are to determine what policies, procedures, and practices are working effectively and which areas require improvements. Such audits can be done monthly, quarterly, or annually, and they can be conducted by managers, regional supervisors, or a third party.
However, today when measures like limiting the number of customers in a store at a given point in time, short work hours, and limiting the number of employees are the norm such in-store audits are next to impossible. Remote audits seem to be the solution to overcome these challenges.
Remote audits are a fairly new concept and it is understandable that field managers may be perplexed on how to go about it. We have put together basics on how to conduct remote store audits and a few best practices. Before taking the plunge, let’s understand why we should have remote audits.
As stores and restaurants reopened globally, protecting customer and employee health was the top agenda on business owners’ minds. However, ensuring a perfect in-store experience for customers was an equally important agenda. Getting back to business after lockdowns implied that store teams be more productive. This eventually put a lot of pressure on frontline employees.
Retail and hospitality companies were quick to realize and embrace an agile way of managing operations remotely, that's far less reliant on person-to-person contact. That's where remote retail store visits and audits came into the equation. Remote store visits seem to be an ideal solution to improve employee performance, safeguard health and make retail and hospitality organizations more agile.
Before moving on to how virtual audits can be done, let’s briefly discuss how in-store audits are done in a conventional way. Every restaurant/store will structure its audit in a different manner. The way the audit program needs to be designed will depend on the general focus and specific insights a store or a restaurant wants to analyze. However, as a thumb rule these are usually the steps to be followed for successfully completing an in-store audit:
This pretty much sums up how physical store audits work.
Though things are getting back to normal gradually we are still far from how we used to function before the pandemic. The restaurant and hospitality industry has been hit hard by the global pandemic. As per a report published on statista.com the social distancing norms and covid measures have led to fewer people dining out. The year-over-year change of dine-in guests in restaurants worldwide, compared to 2019, was -13 percent on September 22, 2021.
This trend has impacted the way restaurants and big franchise chains do their audits and many back-end functions in an effort to save costs and increase efficiency. Franchise owners have replaced 80% of their in-store audits with virtual audits. Virtual audit apps like Delightree played an instrumental role in enabling franchise owners to manage this. To know more about how virtual audits are done using apps like Delightree, read this.
Though in principle the intent of in-store and remote audits remain the same, these are two totally different methods of conducting audits. It is a good idea to follow certain best practices when doing ‘remote or virtual audits’ to ensure they are as effective as any in-store audit.
Make the process simple to follow and implement: The added burden of following strict health guidelines in addition to a decreased foot traffic, less staff, learning to master new procedures and technology have put the in-store staff under immense pressure.
Since audits are inevitable, the burden of involvement in-store visit procedures falls on the same set of people. Hence, it is now more important to ensure that routine checklists and audits are quick and easy to complete. When designing virtual audits make sure it is concise, easy to follow, and give store teams the necessary support to complete store visits competently and confidently. See for example one of the daily checklists on the Delightree app below:
Example: Checking stock room equipment and kitchen equipment during an audit. One can simplify this by adding questions with multiple choice answers. How often is the oven serviced?
Skim your usual audit report to include the most important elements only. Making a simple, easy-to-fill store visit checklist covering important aspects helps cut the burden on your store teams, and is a great way of taking stock and streamlining your processes.
Photos and videos: Photos and videos give the field managers a clear perspective even when they can’t physically visit the store. The Delightree app enables you to take pictures and videos, upload them on the app and share it with the concerned people. Photos and videos give field teams better insight into store compliance.
For example: Upload pictures of the freezer to ensure all food items have been stored as per food safety guidelines. Another example could be a video of kitchen counters and washrooms cleaned after every use.
Open-ended questions: The audit form should have a good mix of multiple-choice and open-ended questions. Including open-ended questions into visits, reports help store teams better communicate what is actually happening as they are not restricted to choose between pre-set answers. With limited face-to-face/in-person communication, it is important to have a set of questions where we get a perspective rather than a choice between pre-set scenarios. Though a written visit report will never match up to a real conversation, it does give team members a platform to flag areas that need immediate attention and action.
Questions around what items on the menu are fast selling and what should be removed. Suggestions on new items on the menu must be open ended for better inventory management.
Constructive feedback: Comprehensive, detailed, and constructive feedback is imperative for the success of remote store audits. If communication and feedback are not clear the purpose of conducting audits is futile. Constructive and detailed feedback is an assurance to store teams that their efforts have not gone unnoticed.
It is easy to feel disconnected and lost when not having in-person interactions. Feedbacks negate this feeling. By explaining comments in detail and opening up discussions on issues not covered in the report, area managers are able to bring human interaction that teams are trying so hard not to lose.
Appreciation posts: A pat on the back, appreciating a job well done goes a long way in keeping people motivated and feeling valued. This is even more important with the change in the work environment and the unrealistic pressures. It motivates the staff to work better towards improvement areas making remote audits a success in the true sense.
Everyone is adapting to the new way of life in the post-covid world both on a professional and personal level. With the help of technology achieving smooth day-to-day operations is not a far-fetched dream anymore. Hybrid and remote working is the future of the changing working landscape. We hope these best practices will help you better perform virtual audits. See how Delightree can help you in remote & virtual audits.
