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Paperwork is probably not the first thing that comes to mind when considering starting a franchise. However, thorough record-keeping is essential for all franchisors and business owners. You must keep all documents and accounting records as your franchise begins and expands. The bigger the franchise, the more complex record-keeping can become, but this does not have to be daunting. This article outlines record-keeping requirements for UK franchisors and ways to simplify the process.
Importance of Record-Keeping for Franchisors
UK law requires franchisors to keep accurate records, including legal and financial documents. There are legal ramifications for inadequate record-keeping. Well-kept records ensure compliance, informed decision-making, and the ability to address potential disputes and facilitate efficient business operations.
The types of records you are required to keep depend on the structure of your business.
Record-Keeping for Legal Documents
The following are some legal documents you must keep records of as a franchisor.
Commercial Contracts
To ensure you keep a comprehensive record of your franchise relationship, you should hold copies of all relevant contracts and agreements. These records include the franchise agreement and disclosure documents between yourself and the franchisees. Keeping copies of any amendments or renewals of these contracts is also essential.
Records of Personal Data
You must comply with UK data protection laws and regulations where your franchise processes personal data. You will likely hold the personal data of franchisees and possibly information about your customers. Your records must be accurate, up-to-date and stored securely. Individuals whose personal data you hold have the right to access, request deletion, and limit the use of their data.
This factsheet sets out how your business can become GDPR compliant.
Records of Intellectual Property Ownership
For the duration of the franchise agreement, franchisees have the right to use the intellectual property owned by your business, including any trade marks, patents, and copyrighted materials. Maintaining detailed records and documentation of your intellectual property rights is highly recommended. In particular, you should maintain a database consisting of the registration and renewal dates of your trade marks and patents.
In the event of any legal disputes, these documents will establish your ownership and rights to the intellectual property. Therefore, by keeping these records, you help to protect your business’ brand and assets from infringement and unauthorised use.
Company Registers
Franchisors are required to maintain particular registers depending on the structure of their business. One of these registers is the register of members, which contains details of all members of the franchisor company. Another vital register is the register of directors, which includes details of all directors of the franchisor company.
Franchisors must maintain a register of charges, which contains details of all charges on the company’s assets. Maintaining these registers is a legal requirement and helps ensure transparency and accountability in the operation of the franchisor business.
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Record-Keeping for Accounting
It is vital to keep up-to-date accountancy records. These records include income, business expenses, assets, liabilities, and financial transactions. It is against the law to fail to maintain adequate accounting records for a business.
Financial records you will come across as a franchisor include:
- the initial franchise fee, which is paid to you by new franchisees;
- ongoing fees paid by franchisees;
- statements of stock held and sold;
- stocktakings;
- annual statements, and
- the business’ balance sheet.
Record Keeping Best Practices
Here are some tips that can help you to remain organised and on top of your records:
- keep records organised by categorising them;
- regularly back up and check your records;
- ensure that documents are secure and are password protected;
- conduct periodic audits to ensure compliance; and
- ensure that you handle and store data in compliance with data protection regulations.
Importantly, you should regularly set aside time for record-keeping. You can use this time to organise records and ensure documents are current. Working in this way helps to break down the administration process into smaller chunks of time.
Key Takeaways
Record-keeping as a franchisor is essential for the lawful and successful operation of franchises. It is also crucial for maintaining your brand, intellectual property, and business assets.
The nature of the record-keeping required can vary based on the type of business you have and its size. Keep an eye on changes to the law and regulations that affect your record-keeping, as this may affect the type of documents you need to keep, the duration you must hold them for, and how you must store and report them.
If you require advice about record keeping for your franchise, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Record-keeping as a franchisor is essential for the lawful and successful operation of franchises. It is also crucial for maintaining your brand, intellectual property, and business assets.
A franchisor must keep legal documents (such as contracts, intellectual property documentation, and company registers). It is also important to keep accurate accounting records. The specific types of records you must keep depend on the structure of your business and franchise. You may also need to keep additional records, depending on the industry your company operates within.
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