Franchise Audits & Compliance - Complete Guide

Keep Your Franchise in Compliance for Success & Integrity

Imagine you are a franchisor looking at adding a franchisee to your portfolio. Typically, these are the steps followed.

Prescreen new franchise. ✅

Share brand style guide. ✅

Share standards and document training manual. ✅

When partnering with a franchisee, all the above boxes must be checked, but franchisors need to do more for their business to survive and thrive. While franchisors choose their franchisees carefully, they must check on them periodically to ensure that standards are followed and that their reputation is not tarnished by unprofessional behavior. Doing this from the outset will reduce many sleepless nights.

Franchisees, however, often find the process of notifying them of audits difficult because it violates their values of cooperative business relationships with franchisees. An audit initiative that is targeted, communicated, and executed well can address many of these concerns.

What is a Compliance Audit?

Let’s first look at what a compliance audit involves. It is an independent evaluation that ensures that an organization adheres to laws, regulations, policies, and procedures, whether they are laws, rules, or regulations. Also, they provide insight into whether a company is compliant with agreements. Most people are familiar with financial audits, like those of public companies through the Sarbanes-Oxley Act (SOX) or of individuals and corporations done by the Internal Revenue Service (IRS).

Compliance audits, however, aren't just financial. They include IT or other security issues, HR compliance, quality management systems, and other areas. All formally registered companies and organizations in the US are bound by federal and state laws, which govern non-discriminatory employment, good health and safety conditions, and secure financial transactions. Broadly speaking risk-based legal compliance audits aim to:

Identify the risks
Eliminate risks
Risk monitoring
Managing risks
Risk advisory

Keeping up with legal compliance is essential to staying compliant and maintaining the integrity of your organization company's mission. Among the benefits of maintaining regular compliance audits are:

Providing a stress-free working environment for employees
Increasing employee productivity
Avoiding compliance fines
Maintaining business operations without interruptions or shut-downs
Assuring the business's reputation

Types of Compliance Audits

The requirements for legal compliance audits vary by industry. However, the following legal concerns are the most common:

Respecting labor laws: Possibly the most rigorously scrutinized area is the protection of workers' rights. Every year, the Department of Labor audits companies to ensure compliance with corresponding rules and regulations.
Environmental and health protections: Failure to comply with safety regulations can result in legal fees, payouts to the victims, and fines from government agencies such as the Occupational Safety and Health Administration, OSHA. Violation of environmental laws will invite the attention of the Environmental Protection Agency (EPA).
Corporate governance guidelines: A company owes its investors and the government sustainability, accountability, and transparency. Governance audits have the aim of verifying the financial and governing decisions and policies of an organization's executive team.
Maintaining data security compliance: Data retention by businesses is legally required to be protected from leaks and abuse. Compliance audits typically evaluate whether or not a company uses updated communication software and hardware that are password protected as well as other solutions that ensure data confidentiality and prevent misuse.

Key Areas in a Compliance Audit

Performance: In auditing the bottom line of the franchisee's business, many other elements become important - whether the franchisee is providing the franchisor with the necessary reporting regularly, like a monthly profit and loss statement, budgets, etc, and whether this is done on a timely basis. Performance audits should dig deeper into the engagement of franchisees within the franchise system by examining whether they attend meetings and conferences and if they send team members to franchisor-facilitated training programs.

Product: This includes:

Compliance with the range of core services
Using approved and preferred vendors
Display and merchandising of products
Maximizing sales through product mix ratios

Promotion: Franchisees should be provided with a corporate style guide that details what they can and cannot do with brand elements, what type of social media they can use, etc. It is important to mention uniforms and other standards that franchisees and their employees must adhere to.

Premises: An organization's shopfront, office, and even vehicles are how the public perceives it. For long-term success, it is critical that these standards are always met. This involves auditing the premises for cleanliness, accessibility, health, and safety obligations, and ensuring equipment is maintained properly.

People: Franchisees within a franchise network may be held liable for breaches of the Fair Work Act. Therefore, franchisors need to ensure their franchisees are doing the right thing by their employees. It is important to check if:

Wages and benefits are paid based on agreements.
Payslips are distributed according to regulations.
Employees' superannuation payments are made to their designated fund at the correct rate.
Validity of agreements with contractors.
Records of written warnings, meeting minutes, and performance reviews are kept.

Audits of Specific Industries

Laws vary by type and state and compliance audit checklists include priorities and areas of focus specific to an industry, state, or type of company. Audits can also be external or internal. While some audits are mandatory, others are voluntary and recommended for preventing future non-compliance. Here’s a broad overview of the focus areas of compliance audits across five major industries:

Retail
Daycare
Salon
Fitness
Food and Beverages

#1 Retail Compliance Audit

Retailers face high turnover and inconsistent practices across locations as top compliance challenges. Maintaining consistency across dozens or hundreds of stores can be difficult. Noncompliance can damage a company's reputation and growth prospects if it directly affects customers and employees. This is where retail compliance audits help as they maintain everyone's understanding of workplace standards, whether it's merchandising, shelving, or displays. A well-conducted audit leads to:

Smoother store operations
Improved employee relations
Improved customer experiences

Compliance in retail refers to a brand's or a store's adherence to corporate, legislative, and/or regulatory guidelines. Displays, promotional signage, layout, cleanliness, and safety procedures are all considered as part of store compliance. Directives from a specific brand, such as display instructions, are part of brand compliance. For retail compliance, the focus of audits is on:

Merchandising: The process of displaying and selling products to customers is merchandising. It involves planning a store layout and making sure the display and positioning of products meet corporate guidelines, as well as making sure that the store looks appealing to customers and is easy to shop at. Merchandising audits tell which products are selling well, and which products need to be restocked.
Safety and health: Ensuring that stores are safe for employees and customers by checking for any hazards and taking preventive measures. This includes sanitization routines, mask-wearing protocols, and limiting the number of stocked items. These audits are important to keep everyone safe and reduce risks.
Operations: Cash handling, returns and exchanges, and daily routine practices such as opening and closing are covered in retail operations. These audits ensure employees are up-to-date on training and can do their jobs well.
Store: This can help assess employees’ adherence to company protocols, safety, and emergency procedures, and check if they demonstrate product knowledge. This also helps ensure if storage materials and electrical systems are in good working condition and that emergency exits or fire exits are not blocked by supplies or inventory materials - situations that leave you vulnerable to OSHA action.

Target Corp. discovered this in 2020 when it was cited for OSHA violations across eight stores for issues ranging from blocked emergency exit access, storage hazards, and worker safety. To resolve the cases, Target had to pay $464K in penalties and upgrade store safety.

Managing these tasks manually can be time-consuming and stressful and that’s why retailers turn to online platforms for help. The Delightree app for instance keeps track of daily and weekly store tasks across locations, cleanliness, equipment maintenance, to even training modules and storing resources like FAQs & videos.

#2 Daycare Compliance Audits

Daycare centers might seem like the business of a lifetime for those who love children, but running one efficiently involves more than knowing how to manage children. Childcare centers are regulated by state and federal laws, and there are applicable state and federal employment laws. Franchise owners are always looking for ways to streamline operations in order to keep up with the ever-increasing competition and be successful in the rapidly evolving childcare market.

The role of compliance audits is helping franchisors ensure that standards are met and care is taken to mitigate incidents like playground accidents, food safety, and careless handling by daycare minders. Some of the key areas daycare audits focus on are:

Follow standards: Daycare centers are required to meet a set of standards created and maintained by each state. Sanitation, discipline methods, and the use of safety devices, such as locked medicine cabinets, fire extinguishers, and smoke detectors, are typically included. Records regarding the children being cared for have to be maintained as well as per childcare standards in some states.
Employee strength: The number of children one adult can care for at a given point in time (child-staff ratio) and the number of children allowed in a class is laid down by every state. For the adults working for child care programs, there are regulations regarding training programs, health checks, and other requirements.
Health and Safety: Children and employees need to be kept safe. The center must be safe, and areas like the playground and toilets must be kept clean and sanitized. Children who are sick should also be isolated so that they don't infect others. Reasonable precautions have to be taken to protect children from individual risks, like a food or medicine allergy. This means ensuring a certain employee-to-child ratio. Regular diaper changes and ensuring hygiene standards in food preparation are also important. Failure to provide this could end up with the center facing charges of child abuse.
Contractual obligations: If the center has promised parents certain services like daily reading time or playtime, these have to be met with. Else the center risks a lawsuit.
Discrimination-free: Discrimination against children and their families is prohibited in public daycare facilities. Federal law guarantees reasonable accommodations for disabled children, such as the installation of an access ramp or a modified daily schedule. A licensed preschool may also be required to provide individualized educational plans for children with learning disabilities.

Keeping such a high level of compliance requires regular monitoring of best practice standards. Platforms like 1Place Childcare come in handy here. 1Place Childcare's time and date stamped photos help new employees understand your goals, while the smart workflows provide links that help support a question with video tutorials, information links, or images. Watch the video for more details:

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Tools like Incident Report documentation is also a useful resource to record any mishaps or injuries at the center. Read more about the benefits of an Incident Report here.

#3 Salon Audit Compliance

Salons must maintain high hygiene standards and provide excellent customer service. Therefore, the operations call for great care and consideration. Salons with more guests can sometimes have procedures slip and you have a violation. For every type of service, there are some federal and state regulations that must be followed to ensure the safety of clients, employees, and the establishment itself. These requirements need to be observed every day.

Apart from state and city requirements, some critical requirements have been spelled out by the following federal agencies:

Food and Drug Administration (FDA): The FDA regulates all cosmetics, drugs, and foods. Salon industry rules and regulations must be followed. Additionally, each state has its own set of rules and requirements for salon activities.
OSHA: OSHA lays down strict standards for salons including:
- A specific protocol must be followed when cleaning up blood and other bodily fluids. OSHA may require HBV vaccinations from employees whose jobs put them in regular contact with blood or other potentially infectious materials.
- The salon owner and management are responsible for maintaining a safe and slip-free work environment. Wet floors and other potentially dangerous situations need to be properly communicated to employees, the public, and customers. It also requires the mitigation of all unsafe work practices, like cords on the floor, electrical outlets, and mats that can cause tripping accidents.
- For any cleaning, work task, or chemical contact that could put an employee at risk, Personal Protective Equipment (PPE) is necessary.

#4 Fitness Industry Compliance Audits

Health and fitness facilities in the US have a variety of definitions determined by state laws. New York and Colorado both refer to health and fitness facilities as "health clubs," but New York delves more deeply into the specifics of what constitutes a health club while Colorado refers to the activities in more general terms. To avoid noncompliance issues, it is important to analyze a state's definition of a health and fitness facility. In light of the recent pandemic, this is even more crucial now.

Some of the more common regulations found across all states are:

Consumer protection: In most states, consumers are protected from deceptive sales and trade practices. Health clubs, fitness centers, and other fitness facilities should maintain escrow accounts before opening to protect their customers. For instance, in Texas, if a health club does not open before the 181st day after it sells its first membership, the members will receive a full refund of their prepayment. The membership contract must be in writing and must describe the services, facilities, and hours of operation; the facility must have a certificate of registration with the state and every customer must be given a copy of the contract.
Employee safety: According to OSHA regulations, fitness center owners/managers are required to ensure the safety of their employees. Regulations related to staff education and training and handling of bloodborne pathogens are among the most important. First aid providers, cleaning crews, and maintenance workers must be trained at the hiring stage on bloodborne pathogens and safe work practices. This should be done on a yearly basis and employees should be given PPE kits and trained on proper disposal of soiled material, and washing hands thoroughly after contact.
Equipment and inventory maintenance: Equipment maintenance is the responsibility of the fitness center committee and this includes establishing a maintenance schedule for maintaining equipment. A record or log has to be maintained documenting the maintenance schedule. An adequate supply of disinfectants and cleaners must be maintained. Some states like California also stipulate that a defibrillator be provided at gyms in case a member or employee feels unwell on the premises. In case the gym has a swimming pool, chlorine and bromine levels have to be monitored and poolside equipment must be cleaned and maintained.
Data privacy: Fitness clubs carry sensitive information about members and employees and it is important to put measures in place to ensure data breaches do not occur to avoid stiff penalties. A data breach can occur when credit card information, social security numbers, bank accounts, or even a consumer's username or email address in combination with other identifying information is leaked. In 2020, personal information from more than 600,000 people was exposed after a data breach at the New York fitness chain Town Sports.

#5 Food and Beverage Industry Audits

Every industry must comply with regulations, but in the food and beverage industry, it can mean the difference between life and death, both for consumers and for processing plant workers. Regulations within the food and beverage industry are largely based on quality and safety standards at the local, state, and national levels. The regulatory compliance challenges are fairly complex in nature.

Take food safety audits for instance. It requires thorough knowledge of management processes, hygiene, risk assessment, monitoring, human resources, health and safety, chemistry, toxicology, engineering, etc.

Regulatory compliance in the food and beverage industry can be challenging. Here is a guide to help you navigate the complex waters.

FDA Food Guidance Compliance and International Food Regulations

Understanding the regulations that need to be followed is critical. Among these is the International Organization for Standardization (ISO) 22000 and the Food Safety Modernization Act (FSMA) of the FDA.

A number of regulations require the implementation of tools to analyze potential hazards and control factors, such as FSMA. For instance, FSMA requires a HACCP management system. HACCP covers physical, chemical, and biological hazards, and it's broken down into several sections:

Dairy Grade A Voluntary HACCP
Juice HACCP
Retail and Food Service HACCP
Seafood HACCP

Regulatory Compliance: Managing regulatory compliance in the food and beverage industry is especially challenging today when strict safety and hygienic standards have become paramount after COVID-19, and policies and procedures are constantly evolving to meet changing consumer needs and health updates.

Regulations for the F&B Industry do not center around food alone. There are regulations specific to the production facility like installation and maintenance of refrigerators, freezer doors, and loading dock seals, as well as controlling the temperature of the facility, and pest control.

FSMA regulations demand transparency of how products are made and where they are at all times during the distribution and consumption phases as well as a range of regulations that demand consumers have all the information they need to make safer and more informed decisions. Besides complying with strict industry regulations, companies must also consider global standards and region-specific requirements.

Employee Training: The most important aspect of regulatory compliance in the F&B industry is employee training. Workers need to be made aware of what the various regulations are regarding food safety and sanitation and what they need to do to comply with them. In addition to training, all facility employees should have access to procedure and regulation documentation.

Food Safety: Documented food safety protocols and certifications are popular among companies throughout the food supply chain. From growing the food to processing it, packaging it, shipping and distributing it, to selling it, every aspect of food and beverage logistics must adhere to food and beverage standards to ensure products are safe for consumption.

In addition to training, all facility employees should have access to procedure and regulation documentation.

Supplier Quality: It is important to track the compliance of suppliers/partners to HACCP and ISO22000 as well as monitor overall performance to ensure quality and safety.

No matter what industry a business is in, compliance audits are essential. The penalties for violations are not only costly, but if a business is not in compliance with a particular regulation, the impact on its reputation can be severe. There are a number of software programs that can help streamline and document an operations process in a more efficient and effective way, which can be helpful when conducting an audit. Compliance standards and regulations are constantly changing, so staying aware of the latest regulations and implementing a plan for compliance will ensure a hazard-free work environment for your employees and safe products for consumers.

Auditing Franchisees: Why it Makes Sense

“It takes 20 years to build a reputation and five minutes to ruin it”.

Chi-Chi's, a chain of Mexican restaurants once famous for its food, will vouch for philanthropist and investor Warren Buffet's quote. Chi-Chi's boomed in the early '80s, and the chain opened 45 new locations between 1981 and 1983. They are no longer seen because of too-rapid growth, which led to a high management turnover rate of 80%, outdated practices, and inconsistent quality control procedures. A hepatitis outbreak at their Pennsylvania outlet linked to unsafe food handling practices didn't help, leading Chi-Chi to say hasta la vista.

This story illustrates perfectly why franchise audits are so important. In franchising, the brand is the most valuable asset. Consistency creates loyal customers and for franchisors to maintain consistency across all locations, franchisee brand compliance is necessary.

It is not easy to ensure that each location follows the employee handbook to the letter. Each franchisee conducts business differently and their different priorities and experiences make them great business owners. At the same time, franchisors must ensure that the brand's core values and standards are maintained and franchise audits enable this by giving visibility into performance and improving operations.

Benefits of Implementing Franchise Audits

It's common for many franchise companies to send a district manager to franchise locations to communicate brand standards, answer questions, and ensure success. This has many benefits, such as:

Implement brand standards: Publishing standards and training programs do not ensure the brand standards will be followed. Merchandising, service, security, and safety standards are most likely to be met when franchisees know there will be multiple checks and verifications.
Continuous learning: Store employees may be well-trained and have all the right answers, but enhancing customer experience is a continuous process. Audits help assess employees’ skills and strengths on a regular basis and serve as a learning opportunity for them.
Excellence in operations: Franchisees are constantly pushed to improve their standards and practices by audits as best practices and brand standards are reinforced. Besides, when franchisors put customer-based metrics and Key Performance Indicators (KPIs) at the center of audits, they can see how operations across locations are actually faring. Audits also identify any disconnects leading to orders delayed or lost and enhance revenue potential. Tracking order entries, warehouse pick-ups, on-time delivery percentage, damaged orders, and shipping speeds help perfect order performance and gain customer trust.
Quality assurance: An audit helps track and prioritize non-conformances for a given food or beverage product, and decide on actions that need to be taken to resolve them faster. Problems with product quality can lead to customer and public relations problems. Analyzing trends based on non-compliance/corrective action (NC/CA), corrective action/preventative action (CAPA), and customer requests and scoring the nonconformances using a quality management system can help determine which quality issues to address first.
Builds knowledge base: An audit can uncover hidden points of product and process weakness by collecting detailed, robust data. This will help resolve future quality challenges.
Ensures brand alignment: Franchisees might have different preferences and priorities depending on their experience and sensibilities. There is a need to ensure that core standards and programs that drive a brand's strategy are implemented uniformly. Audits help with this as they align head office expectations with actual ground conditions.
Ensures customer satisfaction: Operators are brand ambassadors, and if one operator fails to meet the brand's standards, it can hurt the bottom line of all other operators. Franchisee audits help ensure that customer service standards are maintained at every location.
Attracts franchisees: A brand that prioritizes execution attracts both potential franchisees and clients. Multiple-unit franchisees typically invest a tremendous amount of resources like trade shows and dedicated websites- to attract new franchisees. Potential franchisees are more likely to invest their life savings and time in a brand they consider to be stable and efficient.
Monitor sales under-reporting: It is a common practice for franchisees to under-report sales, as doing so lowers their royalty fees. Financial audits are important to verify the franchisee’s sales/royalty reports and reconcile them with EPoS data to highlight variances.

Getting the Most Out of Franchise Audits

For franchise audits to be useful and effective across locations, certain considerations need to be kept in mind.

Manageable audits: Filling out hundreds of questions on an Excel sheet or clipboard is not the best use of an auditor's time. With an app like Delightree, the process can be automated and the time saved can be spent on focusing on the restaurant's problem areas making the audit more efficient. There is also less chance of missing something important. Besides, auditors possess years of experience and can provide staff with best practices. Automating the audit process gives them the time to do this.
Perform micro audits frequently: Training programs and employee handbooks do a great job of teaching roles and responsibilities but are not enough. Employees are better taught and kept more accountable with daily checks. Besides auditing quarterly or annually gives a limited understanding of business operations. Keeping franchisees connected and engaged with franchisors is easier by auditing their locations more frequently. That’s why daily checks, as well as monthly, quarterly, and annual audits, are recommended. By using mobile-first software like Delightree, franchisors can perform daily checks and measure more efficiently. Important tasks are also less likely to be forgotten. Franchisees' performance can be assessed more holistically with daily checks in addition to periodic audits.
Actionable and accessible: Audit reports are a goldmine of data that can be used by the corporate office to identify common problem areas and build training programs and make data-driven decisions. Reports should clearly indicate areas where staff improvements need to be made as well as food handling practices, sanitation, etc. Accessing the data and taking action becomes difficult when it's stored in spreadsheets or paper checklists. Quality Management Software etq has a nonconformance application set that helps foster continuous improvement by minimizing nonconformance to boost product quality. Watch this video to get an overview of etq benefits.
Track corrective steps: Franchise audits identity and correct issues, but if there is no corrective component, it loses some of its value. Identifying actionable solutions and tasks with franchisees helps resolve issues before they turn into patterns that affect customers. Entering audit results into spreadsheets and emails manually slows response time and makes it difficult to manage issues. Cloud-based management software like Safety Chain automates audits, making it easy for corrective actions and follow-up tasks to be assigned.
Compare performance: Reviewing the results of multiple locations together can reveal common failures and successes, as well as possible solutions. Using a tool that lists top problem areas and star performers helps to easily compare franchisee performance and identify areas for improvement quickly. Like uniPoint which offers end-to-end quality control and quality management solutions that enable system-wide issues to be captured, analyzed, corrected, and prevented.
Share the success: The key to keeping franchisees motivated is to celebrate their success stories and share them. Making a video of their journey can motivate other franchisees. One of the reasons Taco Bell has managed to flourish despite controversies like racial stereotyping, human rights violations, and E. Coli outbreaks is because it has built a strong relationship with franchisees, fuelling the company's ability to weather some severe storms.

Quality Audits Critical to F&B Industry’s Future

Post-pandemic, consumers are increasingly concerned with the sources and manufacturing processes of the food they eat. Increasing food safety mechanisms costs the food and beverage industry nearly $19.5 billion in 2021. This makes it important for issues to be addressed immediately.

Audits play an important role in continuous improvement, enhancing customer satisfaction, and increased revenues. Assessing and documenting food safety programs, determining gaps and weaknesses, and preventing and improving them is essential to retaining existing customers and attracting new ones.

A Guide to Food Safety Audits

“USDA Recall: 91K Pounds of Jennie-O Ground Turkey - Meat may be tied to 35-state salmonella outbreak”

“17 Stricken with Food Poisoning, Ate Salad”

“10 Poisoned as Bakery sells Spoiled Eclairs”

Nothing brings down a brand’s reputation faster than newspaper headlines like these. Some of the biggest food chains in the United States have been plagued by food poisoning scandals for reasons ranging from contaminated beef to green onions to shredded lettuce. While some recovered and went on to regain consumer trust, for others it was a fatal blow.

About one in six Americans contract a foodborne illness every year, with 3,000 people dying according to a report by the Centers for Disease Control. That's why food safety violations hog the attention of the media as well as the F&B industry. In 2021, the market for food safety testing is estimated at $19.5 billion. By 2026, it is expected to reach $28.6 billion.

Concerns about food safety have grown during these unprecedented times. The COVID-19 outbreak has put enormous challenges on food supply chains with bottlenecks in sourcing labor, processing, transport, and logistics. There’s simply no room for error when it comes to sourcing and storing food, or keeping surfaces and utensils clean.

Food Safety Audits = Brand Success

The Food Safety Modernization (FSMA) Act regards food safety to be primarily the responsibility of the food industry. As part of its role, the Food and Drug Administration (FDA) establishes strong, risk-based food safety standards and oversees the food industry to ensure it meets these standards. Regular food safety audits help with the following:

Evaluating the compliance of the food processing facility with established food hygiene standards.
Ensuring compliance with specific hygiene policies and practices.
Reducing the risk of unsafe food reaching consumers.
Decreasing costly product recalls.
Promoting a positive reputation for the company.

Eliminate Risks with Food Safety Audits

There are multiple stages in food production and it's possible that a product could become contaminated during any one of these stages and harm end consumers. Retailers, restaurants, and other operators rely on food safety audits to eliminate these risks in these ways:

Transparency and assurance ensure standards are maintained.
Transparency facilitates collaboration among supply chain stakeholders.
This leads to greater safety, efficiency, and continuous improvement within the organization.
Audits also help drive organizational value.

Benefits of a Food Safety Audit

Early detection: Internal audits often reveal problems before they become bigger ones. This gives the restaurant time to make corrections before a federal inspection exposes them or an employee or customer falls ill or gets hurt. You can even do this remotely with an app like Delightree which has tools like checklists, form questions, and picture proofs.
Ensures accountability: It would be ideal if all restaurant employees were doing their jobs in the right way at the right time but an ongoing food safety audit takes any doubts away. Continuous audits help identify who did what when and how. If anything goes wrong, the employee can be held accountable.
Efficient operations: Monitoring processes continuously reveals any procedural lapses, allowing adjustments to be made to drive improvements.
Process improvement: Monitoring continuous audits generate a lot of data and analyzing the data helps understand if things are getting better or worse over time. This data can be used to make small changes on an ongoing basis until the situation improves. With an app like Delightree you can schedule incremental changes and monitor them so improvements can be made.

Reasons to Conduct a Food Safety Audit

Audits of food safety are conducted for many reasons.

To adhere to internationally accepted standards
Management system evaluation.
Business objectives
Customer evaluations or supplier evaluations
Accidents at facilities
Regulatory needs.

Audits Based on Standards

Increasing globalization and complexity have increased the need for standardized, internationally accepted food safety plans. GFSI (Global Food Safety Initiative) is an international committee that has developed a system for benchmarking food safety schemes. Standards-based audits have many advantages like:

Quality assurance: FSSC 22000, Safe Quality Food (SQF), or BRC, are globally recognized standards that ensure food safety and quality.
Cost-saving: It reduces the cost of the food safety audit process by consolidating a large number of costly supplier audits into fewer, standards-based audits.
Improved operations: Many businesses are subjected to proprietary audits and 2nd party audits each year. Consolidation of audits is possible thanks to global standards.
Boosts efficiency: Fewer audits reduce downtime, free up resources, and increase efficiency.
Brand value reinforced: GFSI-recognized schemes validate and monitor auditors that conduct 3rd party audits. This requires them to meet internationally recognized accreditation rules and ensures consistency and integrity.

Food Safety Audit are of 3 types

First Party: The objective is to verify that procedures and management strategies meet the requirements of a standard and reflect business objectives.
Second Party: These audits focus on suppliers’ performance.
Third-Party: Conducted by independent auditors from outside the organization, often for certification.

Mapping the Food Safety Audit Journey

‍Audits are chosen based on resource and cost considerations. Adopting a technology platform can make the auditing process much easier. FoodLogiq is a cloud platform that streamlines and automates supplier documentation and verifications and centralizes records to ensure compliance with the FSMA requirements.

Regardless of first, second, or third-party, the food audit safety journey has five steps:

1. Planning: Clearly defining the objective of an audit is crucial. Based on this there are three types of food safety audits:

Targeted: This looks at a focused area and is sometimes done in response to a customer request, to investigate an incident, or to assess certain parts of a management system.
Random sample: This is for spot checks or follow-up verification of corrective action, and focuses on problem areas.
Process: This provides greater depth and helps identify root causes. It allows for a better understanding of problems in processes.

2. Execution: Ensuring a systematic and thorough food safety audit is important as it:

Enables proactive steps by providing real-time insight into the operations.
Helps in implementing preventative strategies and improving efficiency.
Improves communication and helps build a strong food safety culture within the organization.

3. Corrective Action: Documenting information with descriptions is important to ensure:

Actionable, timely responses.
Deeper analysis of root causes.
Facilitates long-term solutions.
Ensure everyone understands corrective responsibility.

4. Verification: This looks into how effective corrective actions are. Some steps to make this effective are:

Ensure the person who conducts the food safety audit to be different from the person who proposes corrective action to maintain a fresh perspective.
Review collective outputs of a given action to increase the depth of verification.
Mini-audits and follow-up interviews are recommended.

5. Audit Evaluation: Auditing the audit process is recommended for the following reasons:

Helps ensure that it meets the aims and schedule of the audit.
Efficient use of resources.
Checks management’s commitment to implement corrective steps.

Internal Audits Matter

A food manufacturing facility must also conduct periodic inspections of its food safety systems. This is why internal audits, conducted by the company's trained personnel who objectively assess different departments, functions, and processes, are important. The following steps are involved:

Prepare: Establish a goal or scope for the audit and create an annual schedule. Training of internal auditors is also a key aspect.
Act: Make sure the plan is implemented appropriately and completely.
Review: Prepare a non-conformity report and assign responsibilities and deadlines for determining cause and corrective steps.
Verify: Check the effectiveness of the corrective actions taken and verify that they will prevent recurrence in the future.

The Delightree app makes internal audits painless and less stressful as it allows this to be managed remotely across multiple locations.

How to Conduct Internal Audits

There are different ways of conducting internal audits and documenting them. Here’s a look at each approach.

Facility Walkthroughs: Conducting a walkthrough of the facility and recording any nonconformances is part of this process. The drawback of this approach is that it doesn't establish to any third-party certification process that there's a structured approach. Internal audits must have a specific scope and documentation to be effective.
GFSI Checklists: A standardized document like GFSI checklists ensure that the internal audit team follows every regulatory requirement. These GFSI checklists can be divided into sub-parts to be completed on a weekly or monthly basis. In this way, all areas and parts will be checked on schedule. With an app like Delightree, these tasks can be scheduled and verified remotely.
Customized Checklists: With the Delightree app, one can also create customized checklists specific to each facility. This has many advantages like:
Direction: Gives the internal audit team a clear path to follow.
Completion: Ensures auditors address the entire scope of the audit.
Reinforce aim: Defines the scope - whether the audit is into a process, team, or product.
Clear records: Shows third parties that your audit was thorough.

Customized Checklist Setup

Customized internal audit checklists vary according to facility types, but there are some broad items common to every facility, like:

Date of audit
Time started and finished
Areas under audit
Details of auditors
Representatives from quality assurance, sanitation, maintenance.
Area-specific examination of equipment, product handling, processes, etc.
Document every area with comments for improvements, nonconformances, etc.
Identify target date and person for corrective actions
Share findings with plant managers, senior managers, supervisors, etc.

Food Safety Audit Best Practices

Dave Thomas, the founder of international fast-food chain Wendy's International, Inc, has many quotable quotes to his credit, but there’s one that best captures his personal and business philosophy. Thomas, who opened the first Wendy's restaurant in 1969, said, "You earn your reputation by the things you do every minute of the day." He established a corporate culture that prioritized quality as a key element of Wendy's restaurants.

Many things have contributed to Wendy's consistently stellar reputation, which includes a strong food safety component supervised by the Quality Assurance department, which operated independently within the organization reporting directly to senior management. The department has three primary responsibilities:

Managing food safety and sanitation at restaurants.
Maintaining product quality throughout the supply chain
Assisting the management in identifying and managing food safety and quality issues.

Wendy's food safety practices are ingrained in its DNA in many ways, including:

An operations manual outlines how the stores will be operated from open to close.
The manual outlines specific food safety and quality assurance procedures.
Food safety practices are ingrained through awareness programs.
A ServSafe food safety training and certification is required for multi unit and individual restaurant managers.
The Wendy's Management Institute (WMI) curriculum stresses food safety for restaurant managers.

Defining the Process of Restaurant Franchise Food Audits

Now let’s take a look at what goes into ensuring franchisee compliance with food safety standards. Given the heightened focus on food safety after the pandemic, the most recent relates to the FDA checklist for restaurants that are reopening. Many companies have launched specific tools to help restaurants ensure they are keeping their food safe in the post-pandemic world. Like North Carolina-based Steritech which has launched a Critical Food Safety Check tool to coach restaurant operators on safety standards that are of high priority. With a virtual version of the tool, operators can navigate food safety and safe service without facing a physical audit.

Food safety inspection: This evaluates the food safety practices and hygiene of a food establishment and ensures that food-related activities are conducted according to set standards. It involves:

Evaluating employee hygiene, food handling and storage processes, and proper waste disposal.
Whether compliance and non-compliance of items is documented.
Identifying and assigning corrective actions to issues found during the inspection.

HACCP food safety standards: Each chain's HACCP plan outlines certain monitoring procedures. Instead of relying on product testing and inspection for food safety, HACCP focuses on preventing contamination and hazards before they happen by evaluating if:

Personal hygiene is maintained
Preparation of food
Holding - cold or hot
Refrigeration
Dry storage and food
Sanitation and cleaning
Kitchen utensils and equipment
Disposal of garbage
Pest control

Kitchen hygiene audits: Food ingredients are monitored as well as the food served to customers. This involves many aspects:

Cleanliness: This is the most important aspect of kitchen hygiene.

Paint walls and tiles on the floors are not flaking or damaged or chipped.
Dust and clutter is not found in the main operating areas.
Sanitation chemicals are used with a colour coded cleaning program.
Cooking utensils and appliances are free of dust and dirt.
Adequate supplies of washing towels, cleaning cloths, etc.
Regular check lists and cleaning schedules are followed.

Maintenance: This covers the following areas:

Appliance maintenance: Checking the last service date, e.g. oven, fridge, freezer, etc
Wiring and electrical fittings: Checking for loose wires, damaged fittings, etc.
Drains and sinks: Ensure that sink drains are clear and free flowing
Validity of credentials: Making sure that required credentials, such as pest control, fire safety, are valid so that kitchen personnel and food are safe.

Storage: There are three storage areas: non-food, cold, and dry. The audits evaluate:

Temperature: That food and ingredients are kept at the right temperature.
Product validity: Verifying the validity of ingredients or foods.
Storing pattern: Food, crockery and ingredients are stored in accordance with best practices.

Personal Hygiene: Commonly observed factors are:

That staff members sanitize their hands before preparing meals.
Employees use aprons, gloves, and headwear.
Mobile phones are not used when making food or wearing gloves.
Fresh spoons/forks are used for food tasting.

Food quality assurance: This aims to create an environment which ensures the food product being prepared will meet all its quality requirements. This typically involves a defined cycle called the PDCA - plan, do, check, and act.

Plan: That all the processes required to deliver a high-quality end product are followed.
Do: Test these processes and suggest changes if needed.
Check: Monitor processes, modify them, and ensure they achieve set goals.
Act: Implement necessary measures for process improvement.

Sanitation audits: Apart from examining records, the audit involves visual observations.

Observe equipment and staff carrying out the cleaning and sanitation activity.
Observe sanitation practices in processing areas as they occur, take measurements of chemical concentration, ATP testing, allergen testing, etc.
Whether cleaning tools and chemicals are color coded and kept in the designated area.
Check whether schedules are maintained of sanitation activities such deep cleans as well as routine cleaning and records kept.
Check the procedure for disinfecting equipment and for validating it.

Mystery Audits: Mystery audits are also used by many franchisors to assess compliance with brand standards. This is typically done by employing a mystery shopper, also known as an anonymous evaluator. There are mystery shopping agencies like SeeLevel HX that assess compliance across locations by assessing the following:

Quality: Whether rules in food safety and handling are followed strictly by employees and also check for FDA compliance.
Consistency: Mystery shoppers check if the restaurant, and any of its locations, are staying true to the brand standards implemented.
Expansion: Mystery audits help ensure that the same product quality, speed, service, presentation, cleanliness and employee performance is maintained at every store, no matter how many locations there may be.
Knowledge: Hiring mystery shoppers helps establish whether employees are adhering to the brand standards that have been laid down.
Customer service: The time taken for the food to arrive and the temperature it's served at.

Ultimately, food safety audits are crucial to a brand's integrity and long-term success. The spotlight on food hygiene and safety has increased after Covid-19 and regular audits are an effective way to ensure consistently high standards are maintained. This can be done easily and effectively with a mobile phone platform like Delightree which is enabling many brands to better manage their operational and quality processes. The insights gained from these audits can help formulate specific, well-planned, and executed actions that can transform your business.

Conducting a Franchise Field Audit: Best Practices

A successful franchised business is an outcome of the ability with which a franchise system and the franchisees fulfill the important responsibilities placed on them. For a franchise system, the responsibilities mainly revolve around:

Business concept and model
Running the system
Promoting concept growth

A franchisee’s responsibilities comprise:

Efficiently running the businesses within the franchise systems concept
Fulfilling their obligations towards the franchisor
Fulfilling all monetary obligations

If one party fails to effectively perform its responsibilities, a franchise system is bound to collapse.

Take the case of Sbarro for example. Founded in 1956 by Italian immigrants Gennaro and Carmela Sbarro in Brooklyn, Sbarro Pizza filed for bankruptcy in early 2014 (twice within three years). Sbarro had 800 restaurants of which about 600 were franchised locations. As they expanded, they failed to maintain their food quality, leading to bankruptcy eventually.

Therefore, it is important that a franchisee keenly observes how the franchisor runs the system to ensure that proper investments are being made into the concept and that the concept is being properly run and promoted.

Similarly, franchise systems should closely monitor their franchisees for system compliance to ensure brand protection. Compliance with operational and store appearance standards is one part of what the system must monitor. We have already discussed in detail various aspects that need to be audited from a compliance and audit perspective.

Audits effectively monitor franchisee compliance and are an integral process of running a successful franchise business. A ‘franchise consultant’ plays an important role in the success of a franchise business by ensuring all compliances are in place. Following these best practices when conducting a franchise field audit will ensure that franchisors perceive auditors and franchise consultants as friends and not foes.

Keep it simple, eliminate redundancy and keep the questions clear and crisp

Repetitive and redundant questions entail unnecessary work for the auditor as well as the executive answering the audit questions. Re-visit your audit checklist and questions and eliminate any questions that may no longer seem relevant. For example, questions around manual registers to check employee work hours and in-out time is a thing of the past. These days all such systems are automated. It is best to check system logs instead of questioning the maintenance of registers.

Questions asked during an audit should be clear and target one problem area. If one question is around multiple operational concerns, it becomes difficult to figure out what needs fixing. Example: “The kitchen faucet and appliances are working fine? Is the kitchen flooring fine and the drainage system working well?” Here, it will be difficult for the franchisor to understand where the failure has occurred and what needs to be fixed.

Questions for an audit should be a mix of multiple-choice and subjective questions. Processes like temperature checks, FIFO method used or not can be framed in a Yes/No answer format. Questions around safety, kitchen equipment maintenance can be subjective.

The response should be quantifiable, actionable, and relevant

When planning an audit ensure that you design the questions in a manner such that their responses can be measured and are actionable. If the responses can’t be quantified and are not actionable, then the purpose of conducting audits is futile as problems remain as is.

Be mindful of the audit flow and length

The audit “flow” should be designed keeping in mind the entire process flow. Start from the front door and end with the coaching session at the back. Also, be sensitive to the audit length, make sure the length is relevant and achieves its goals. Most long-form audits contain 200 to 400 questions and short audits contain 100-200 questions.

Include references and tag questions with relevant documentation and processes

Questions around standards should include a reference to the franchise manual or standard process guide. It is also a good practice to tag specific questions with a relevant process that drives a particular standard. A particular set of standards are associated with a particular back-end process. In case these standards fail, an auditor advises to rectify the root cause rather than each standard.

Mark core processes as critical

Some processes are the very basis of the brand and critical to its success. Questions around kitchen and food safety should have a “critical” marking in case of restaurant audits. Audits on these core areas should be marked with severity, and the auditor must ensure “that the audit should fail if any such core and critical processes fail.”

Set a corrective action plan for failures and clearly define the person responsible

Clearly define a corrective action plan for tasks where there has been a lapse and also clearly define the person responsible for its resolution. Failure to do so will result in a backlog of tasks indicating a lack of process or of training.

Review processes and standards with an intent to resolve failure at an organizational level

There are times when a core process is consistently not being followed at an organizational level. A probable solution to resolve a failure that exists at the macro level can be to include new practices like recurring self-assessments. Example: A consistent failure on the way frozen meat is thawed may require a system-wide training or process reminder. An additional step to ensure that the thawing process is diligently followed would be submitting pictures and videos of the thawing process.

Be assertive and not dominant

As a franchise consultant, be assertive in ensuring that all compliance requirements are being met. Work in collaboration with the franchisees rather than bossing around.

All auditors adhere to the same standards

A franchise system has multiple franchisee locations. Different auditors will conduct audits in these different locations. At times the average scores among auditors may have dramatically different scores. The root cause of such differences could be an inconsistent understanding of what the standards are for each auditor. As a franchise consultant, ensure that all auditors are on the same page and adhere to the same standards and guidelines.

Develop a photostream of the key important standards

Some processes often have a lot of ambiguity such as how the table has to be laid out and cleaned before and after each service. In such cases, it is advisable to document such standards in the form of pictures and videos to highlight both when a standard is not met AND when it is met. It helps everyone better understand the standards and minimize ambiguity. Some standards, even if they do not have any ambiguity around them, should be consistently documented with pictures.

Define and implement an approval process to prevent a backlog

A backlog of pending internal audits implies consistent bottlenecks in the system. As a franchise consultant, ensure that an approval process is set up within the system and the accountable auditor manager is aware of your expectations. Alternatively, implementing technology to approve questionnaires will ensure no backlogs.

Ensure regular visits at all franchise locations

As a franchise consultant make sure to visit all franchisees on a regular basis such as once every quarter. A franchisor too should ensure that these visits happen by holding the consultant accountable to submit reports of such visits. Failure to adhere to this process has often proved to be detrimental to the franchise brands on many levels.
Some 4,148 Subway franchises failed between 2017-2019. These failures are often attributed to non-compliance and non-adherence to processes.

The underlying principle of all these best practices is to re-visit processes and standards from time to time and implement changes as and when required. Effective change management and implementation, following these best practices internally is the key to ace audits and run a successful franchise system.

How To Manage Remote Store Audits - Best Practices

Historically, humans have been adaptable to change. In the pre-covid era, the only way we managed audits and reviews was in person. However, COVID-19 hit hard in 2020, and boom!!!... The world changed beyond what any one of us could fathom. We were forced to confine ourselves to our homes. With countries going into lockdowns and the fear of the virus looming, getting back to business became a challenge for most businesses including global franchises like McDonald’s, KFC, Chipotle, and the likes even when things started to open up gradually. Modern-day technology and the internet had a big role to play for businesses to continue as usual. It also brought to fore many benefits of remote working. To win back customers and ensure COVID safety became a huge challenge. Business owners were quick to realize that “audit and compliance” were now more important than ever before. However, owing to the pandemic weekly in-store audits were not a possibility. Innovators like Delightree were quick to come up with digital platforms to conduct remote store visits.

But first, let’s delve into store audits and their importance for a business.‍

What are in-store audits?

Store audit refers to a detailed inspection that examines everything from a store’s visual merchandising to sales to inventory levels. The purpose of doing these audits are to determine what policies, procedures, and practices are working effectively and which areas require improvements. Such audits can be done monthly, quarterly, or annually, and they can be conducted by managers, regional supervisors, or a third party.

However, today when measures like limiting the number of customers in a store at a given point in time, short work hours, and limiting the number of employees are the norm such in-store audits are next to impossible. Remote audits seem to be the solution to overcome these challenges.

Remote audits are a fairly new concept and it is understandable that field managers may be perplexed on how to go about it. We have put together basics on how to conduct remote store audits and a few best practices. Before taking the plunge, let’s understand why we should have remote audits.

Why are remote audits a viable option in the post-covid world?

As stores and restaurants reopened globally, protecting customer and employee health was the top agenda on business owners’ minds. However, ensuring a perfect in-store experience for customers was an equally important agenda. Getting back to business after lockdowns implied that store teams be more productive. This eventually put a lot of pressure on frontline employees.

Retail and hospitality companies were quick to realize and embrace an agile way of managing operations remotely, that's far less reliant on person-to-person contact. That's where remote retail store visits and audits came into the equation. Remote store visits seem to be an ideal solution to improve employee performance, safeguard health and make retail and hospitality organizations more agile.

How do virtual audits work?

Before moving on to how virtual audits can be done, let’s briefly discuss how in-store audits are done in a conventional way. Every restaurant/store will structure its audit in a different manner. The way the audit program needs to be designed will depend on the general focus and specific insights a store or a restaurant wants to analyze. However, as a thumb rule these are usually the steps to be followed for successfully completing an in-store audit:

Schedule time only for audit: It is important to ensure that the store manager or staff that will be conducting the audit or assisting the auditor is not distracted by day-to-day store activities. Try scheduling an audit during slow periods of the day (preferably lunch-time or after the store is closed to the public.) Take into account areas you know will present challenges and require extra time.
Create a list of objectives: Make a list of what you want to achieve by doing the audit. This will typically include areas that need improvements and specific data you may want to collect.
Take detailed notes and photos or videos: Photos and videos will help you compare what the store looked like before the audits and what it looks like after improvements are done based on the suggestions made in the audits.
Delegate responsibility and tasks to associates: Clearly define tasks and responsibilities and the individual response to correct problems that were found during the audit.
Follow up: It is important to follow up with the person responsible to make sure that the recommendations from the auditor have been implemented. It is also important to make sure that the suggestions implemented have been effective in solving the problems.
Analyze change: The next step to follow-up is to analyze the solutions implemented to make sure they are giving the desired results. For example, during the audits, you felt that goodies like candies and fancy stationery items should be kept next to the exit billing counter in a self-service food outlet. You acted accordingly, however, stationery did not move as anticipated, which means it did not yield the desired outcome.

This pretty much sums up how physical store audits work.

Though things are getting back to normal gradually we are still far from how we used to function before the pandemic. The restaurant and hospitality industry has been hit hard by the global pandemic. As per a report published on statista.com the social distancing norms and covid measures have led to fewer people dining out. The year-over-year change of dine-in guests in restaurants worldwide, compared to 2019, was -13 percent on September 22, 2021.

This trend has impacted the way restaurants and big franchise chains do their audits and many back-end functions in an effort to save costs and increase efficiency. Franchise owners have replaced 80% of their in-store audits with virtual audits. Virtual audit apps like Delightree played an instrumental role in enabling franchise owners to manage this. To know more about how virtual audits are done using apps like Delightree, read this.

Best practices to follow when doing ‘Remote audits’

Though in principle the intent of in-store and remote audits remain the same, these are two totally different methods of conducting audits. It is a good idea to follow certain best practices when doing ‘remote or virtual audits’ to ensure they are as effective as any in-store audit.

Make the process simple to follow and implement: The added burden of following strict health guidelines in addition to a decreased foot traffic, less staff, learning to master new procedures and technology have put the in-store staff under immense pressure.

Since audits are inevitable, the burden of involvement in-store visit procedures falls on the same set of people. Hence, it is now more important to ensure that routine checklists and audits are quick and easy to complete. When designing virtual audits make sure it is concise, easy to follow, and give store teams the necessary support to complete store visits competently and confidently. See for example one of the daily checklists on the Delightree app below:

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Example: Checking stock room equipment and kitchen equipment during an audit. One can simplify this by adding questions with multiple choice answers. How often is the oven serviced?

Once a month
Once in six months
Once in three months

Skim your usual audit report to include the most important elements only. Making a simple, easy-to-fill store visit checklist covering important aspects helps cut the burden on your store teams, and is a great way of taking stock and streamlining your processes.

Photos and videos: Photos and videos give the field managers a clear perspective even when they can’t physically visit the store. The Delightree app enables you to take pictures and videos, upload them on the app and share it with the concerned people. Photos and videos give field teams better insight into store compliance.

For example: Upload pictures of the freezer to ensure all food items have been stored as per food safety guidelines. Another example could be a video of kitchen counters and washrooms cleaned after every use.

Open-ended questions: The audit form should have a good mix of multiple-choice and open-ended questions. Including open-ended questions into visits, reports help store teams better communicate what is actually happening as they are not restricted to choose between pre-set answers. With limited face-to-face/in-person communication, it is important to have a set of questions where we get a perspective rather than a choice between pre-set scenarios. Though a written visit report will never match up to a real conversation, it does give team members a platform to flag areas that need immediate attention and action.

Questions around what items on the menu are fast selling and what should be removed. Suggestions on new items on the menu must be open ended for better inventory management.

Constructive feedback: Comprehensive, detailed, and constructive feedback is imperative for the success of remote store audits. If communication and feedback are not clear the purpose of conducting audits is futile. Constructive and detailed feedback is an assurance to store teams that their efforts have not gone unnoticed.

It is easy to feel disconnected and lost when not having in-person interactions. Feedbacks negate this feeling. By explaining comments in detail and opening up discussions on issues not covered in the report, area managers are able to bring human interaction that teams are trying so hard not to lose.

Appreciation posts: A pat on the back, appreciating a job well done goes a long way in keeping people motivated and feeling valued. This is even more important with the change in the work environment and the unrealistic pressures. It motivates the staff to work better towards improvement areas making remote audits a success in the true sense.

Everyone is adapting to the new way of life in the post-covid world both on a professional and personal level. With the help of technology achieving smooth day-to-day operations is not a far-fetched dream anymore. Hybrid and remote working is the future of the changing working landscape. We hope these best practices will help you better perform virtual audits. See how Delightree can help you in remote & virtual audits.