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 and poor store operations, and employee theft. Executives leading franchise organizations have a responsibility to their Franchisees to ensure that all sales are reported accurately, store operating 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 their franchise owners’ reported sales, were losing as much as 20% of their royalty and advertising income. One national Quick Service Restaurant (QSR) chain, that implemented Mershimer’s Royalty Assurance program, realized a 10% improvement in royalty income after just eight months.

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 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. Our national team of professionals, work to protect an organization’s brand. Each client is assigned an Account Director who will act as the client’s Loss Prevention Director or as the liaison to the clients current Audit or Loss Prevention Executive. These individuals have years of senior-level loss prevention experience in the retail and restaurant industry.

Solutions

Mr. Mershimer has demonstrated results in royalty assurance programs he has led and designed with global franchise organizations, including some of America’s favorite brands. We build long term relationships with our clients, and work with them through the implementation of the program and measurement of results. 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:

• Work with client to determine metrics for identifying potential underreporting issues. Where possible, we calculate the current amount of loss and set goals for improvement.
• Franchise agreement review and feedback on royalty assurance language.
• Royalty Audits, Mystery Shopping, Awareness & Franchisee Communication Program, Documentation of Underreporting, and Meetings with underreporters to discuss evidence documented and to discuss next steps.