Records Retention: What To Do As A Franchisee

Published on August 09, 2016

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As a new franchisee, one of the first things you’ll be doing is amassing a physical and virtual mountain of paperwork – documents which comprise the vital records required for your new business. In fact, creating these records begins as early as the Franchise Disclosure Document (FDD) you receive from the franchisor, and the resulting Franchise Agreement (FA) that seals the deal between you and the franchisor. These two are but a small component of the franchise records you will be required to maintain during the entire lifetime of the franchise AND BEYOND.

Records? What Records?

In short, every single aspect of your business must be documented from Day One. For example: The table below lists the categories and types of documents for a rudimentary franchisee file system.

Category Type
Franchise Franchise agreement (FA), Franchise Disclosure Document (FDD), Lease agreements/riders, Vendor contracts/agreements, P&L statements, Balance sheet, Chart of Accounts, Sales/POS transaction records, etc.
Biz Taxes Fed, state, local, sales; Payroll, Workman’s, State UI, Wage Payment and WH payments.
Biz Expense Rent, utilities, supplies, marketing, professional services, training, travel, Merchant Services, uniforms, royalty/ad fund payments, etc.
Employee Info Employment application, resume, fed WH, Citizenship I-9, Non-disclosure Agreement, Background Check results, FCRA results, Performance reviews/Disciplinary Actions, Policy Acknowledgements, etc.
Bank Accounts Checking, savings, credit card
Loan Account Financing, construction/build-out, loan payments, etc.
Health Insurance Personal and Employee: Policy details, endorsements, etc.
Biz Insurance Biz Insurance policy-coverage & payments, endorsements.
Biz Licenses, Permits, and Certifications Fed/State/Local; Alcohol, Health Department, Food handling, etc.

 

How you set up/organize your own filing system is a matter of preference. It’s important to organize your files and records based on what makes the most sense to YOU, since you are the one who will be organizing, adding to, and maintaining the filing system. Sure, there are file and data organization experts and systems to help you. But probably the best place to get the best advice on this is your franchisor and fellow franchisees. Minimize or eliminate the time spent reinventing the wheel.

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If you have not already started creating the physical and electronic folders on your PC/laptop for these vital records, there’s no time like the present to start organizing what you already have! It is equally important to ensure that your records are secure – under physical lock and key, or in a secure/password-protected digital/cloud-based environment. Since we have not yet become a paperless society, you’ll need to allow for both storage environments.

Establishing a records maintenance and retention system will only help you in the long run. Generally, franchise business records must be kept for a minimum of 3 years for employee records, up to 10+ years for Federal tax records.

Something to consider regarding your electronic/digital records and files: With today’s technology, you have many options for storing your digital data – DVDs, flash drives, cloud storage, etc. Keep in mind that technology changes very quickly. Media formats and cloud storage options that work today could be obsolete in 5 years. Sadly, no one has a crystal ball on the event horizon for the net innovation in this area. But the upside is: there will likely be some legacy systems/options available. Even in 2015, for those who diligently backed up their business records in the 80s and 90s on 3.5 inch floppy disks, they can purchase a USB drive to read those old diskettes and copy them to a current storage environment.


About the Author: Jeff Lefler
As the CEO of FranchiseGrade.com, Jeff understands that there is no Silver Bullet or sure-fire, simple way to pick a guaranteed franchise system winner. However, by using a little science and a lot of hard work, Jeff and the team at FranchiseGrade.com have developed a sophisticated research, analysis and comparison model to help potential investors and existing Franchisees assess a realistic value for any franchise system relative to others. It's called a Franchise Grade. With over fifteen years of small business experience and ten working in franchising as a multi-unit Franchisee, consultant and Franchisee Association President, Jeff has a good understanding of the level of hard work, dedication and commitment that drives a successful franchise system. As part of his ongoing involvement with the industry, Jeff also served as a Member of the Strategic Committee of the International Association of Franchisees and Dealers. Get in touch with Jeff to see how your system measures up.
Records rentention

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