THE HAIR EMPORIUM Code: Date: THE HAIR EMPORIUM Accounting and Financial Records to be shared or not to be shared Franchising business has several requirements that both the franchisor and franchisees must report to each other…
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There are various reporting requirements in franchising as already mentioned above; information shared is both operational and contractual. Through the Franchise Disclosure Documents (FDD) the franchisor is required to disclose or share its annual audited financial accounting reports with the franchisees (Mann & Roberts, 2007). Consequently, the franchisees can/may request current FDD in accompaniment with audited financial statements at any time. Further, the franchisor is obliged to provide on-going assistance to the franchisees as stated in the franchise agreement; this often occurs via franchise operations and training manuals that are continuously updated. FDDs usually include franchise agreements, and financial statements including the balance sheet, statement of earnings, income statement, cash flow statement and the statement of owner’s equity. These documents are vital as they help the Franchisees to know the franchisor’s history of profitable operations (Mann & Roberts, 2007). Further, the FDDs help the franchisees to know whether the franchisor is financially stable currently for them to increase or decrease their investment in the latter. A list of current franchisees with their current contacts is also important as the franchisees or prospective franchisees can use the information to contact others inquiring about their experience with the franchisor (Mann & Roberts, 2007). ...
Given this fact, Rolando and Rosa will have to share all its financial and accounting records with its subsequent franchisees to ensure smooth operation of its business (Baldwin, et al., 2011). Importance of completing balance sheets and operating statements on a monthly and yearly basis Completing balance sheets and operating statements on monthly and yearly basis by the Hair Emporium is vital; the firm will be able to determine its profitability at any given month; franchisor will be able to know whether through its franchising operations, it has the ability to earn profits or incur loses (Baldwin, et al., 2011). For the firm to be in business it must be able to earn profits. According to these facts, completing balance sheets and operation statements on monthly and annual basis will help the Hair Emporium understand whether it is earning profits or incurring loses within the said periods. Secondly, the Hair Emporium will understand its liquidity; for instance, the company will know its ability to meet both its short-term and long-term financial obligations. Consequently, completing balance sheets and operating statements on monthly and yearly basis will help the Hair Emporium to know how efficient it is in delivering services. For instance, how productive the firm is utilizing its assets relative to its revenue and its profits (Baldwin, et al., 2011). In the same line of discussion, the Hair Emporium will be able to understand its financial stability; the firm’s overall financial strength will be established through these monthly and yearly checks. The firm will also use the completed monthly and yearly financial statements to estimate its future income and expenses based on
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