A franchisee of the franchise system must maintain their financial records, business records and reports in compliance with the confidential operations manual set forth by the franchisor. Each franchisor must make sure that the guidelines for the books, accounting system and business records are understandable and gone over in training. Additionally it would be recommended that such issues were addressed into franchising agreements prior to the commencement of the franchised outlet.

In my franchising company I had inserted a clause to address this very issue. Below you will find the clause that I came up with that became part of every franchise agreement that our company signed;

3.17.1 Maintenance of Books; Reports

Franchisee must maintain full and complete records of all business done and revenue Franchisee receives through the Franchised Business in accordance with generally accepted accounting principles employed in the Marketing Area or the United States and the standards and Confidential Operations Manual provided by Franchisor. These records will include, but are not limited to, order sheets, sales agreement forms, daily sales summaries, tax returns, financial statements, and invoices. Franchisee will date, file in consecutive order, retain for a period of five years, and make available to Franchisor for inspection and audit all of Franchisee