Controlling is concerned with determining standards and methods of evaluating performance against predetermined standards to evaluate operating results. Controlling is an important function of any franchising organization. Proper evaluations need to be established and once in place should be followed by prompt praise or punitive actions if the results are particularly deviant from the standard. Most evaluations by franchisors include the following functional areas:

    Sales appraisal

    Costs of goods sold appraisal

    Costs of labor appraisal

    Appraisal of performance of managers

    Appraisal of performance of assistant managers and staff

    Appraisal and analysis of financial transactions

    Appraisal of headquarters managers, e.g. directors of   franchise sales, training, purchasing and grand opening managers

The franchisors need to be able to develop controls and methods of determining appropriate performance levels in the areas of sales, costs, profits, quality control, employee morale, turnover, and general appearance.

It is important to establish control functions for every area of the business that will be used in the decision making process. For example, in a fast food franchise the costs of goods sold plus labor costs generally will not exceed 50% if they are a non-meat franchise store. The food costs may range anywhere from 29% to 35% while the labor costs would range from 15% to 21%. Some franchise and chain stores keep this total between 45% to 50%.

Because of the capabilities of computers and cash registers, many franchisors now pull financial information from the franchisees on a daily basis. The franchisee may be involved in a fast food operation and, at the end of the day as they are closing, they simply punch a button which allows the computer system in the back of the store to send information to the franchisor's headquarters which receives this information and compares that to the standards previously established. If sales are low or if the costs are high, then the franchisor can provide this information to the support staff as well as to the franchisee and help them pinpoint opportunities for improvement. Many franchisors also use this method to determine inventory levels in franchisee stores and at times will automatically send out inventory to replenish the diminished supply.

When sales are high, the franchisor can also send out a letter of praise or phone the franchisee and praise them for their excellent efforts. The franchisor needs to be able to communicate with the franchisee about both the negative and positive aspects of their business.