Two masters, one set of books
Your landlord reads turnover to set rent. Your franchisor reads turnover to set royalties. They define it differently, want it in different formats, and both can audit you. We produce both from one close.
A franchisee answers to two organisations that both want numbers: a landlord who reads turnover to calculate rent, and a franchisor who reads turnover to calculate royalties. They rarely define it the same way, they never want it in the same format, and they both have audit rights. Franchise accounting is largely the discipline of producing both from one reliable set of books.
The obligations that sit on top of ordinary retail accounting
- Royalty on gross sales — usually a percentage of gross sales, calculated on the franchisor's definition, payable monthly, and audited periodically.
- Marketing and advertising levy — a further percentage, often into a central fund, with its own reporting.
- Initial franchise fee — a capital cost, recognised over the franchise term rather than expensed on payment.
- Mandated systems and reporting — franchisors frequently specify the POS, the chart of accounts and a reporting pack in their format, on their calendar.
- Cross-border payments — royalties to an overseas franchisor raise the reverse charge for VAT on imported services, and the payments must be arm's length where the franchisor is a related party, engaging transfer pricing.
- Territory and unit reporting — multi-unit franchisees report per unit as well as in total, which is exactly the store-level reporting a good ledger already produces.
Two definitions of turnover, one ledger
| Landlord (turnover rent) | Franchisor (royalty) | |
|---|---|---|
| Basis | Gross turnover as the lease defines it | Gross sales as the franchise agreement defines it |
| VAT | Usually excluded | Usually excluded, but check |
| Delivery aggregators | Often at gross order value | Frequently at gross order value |
| Staff discounts | Usually at price charged | Sometimes at full menu or list price |
| Vouchers | Commonly on redemption | Varies by system |
| Frequency | Monthly or quarterly, annual certificate | Usually monthly, with audit rights |
We map both definitions to the same POS data once, and then produce both reports from a single close — rather than maintaining two versions of the truth and hoping they never meet.
Reviewed 18 August 2026 by Ahmed Nabil Selim. UAE tax rates, thresholds and deadlines change — confirm the position for your period before relying on it.
Franchise accounting — frequently asked questions
Not as an expense in the month it is paid. The initial fee buys the right to operate under the brand for the franchise term, so it is capitalised as an intangible asset and amortised over that term. Expensing it immediately understates the first year severely and distorts every comparison with later years — which matters if you are ever selling the unit or raising finance against it.
Generally the reverse charge applies. Where a UAE business receives services from a supplier outside the UAE, it accounts for the VAT itself — declaring output tax and, where it is entitled to full recovery, recovering the same amount as input tax in the same return. The net cash effect is usually nil for a fully taxable retailer, but the entries are mandatory and omitting them is a common finding. Franchisees frequently miss this entirely because no supplier invoice charged them VAT.
If the franchisor is a related party or connected person, yes — UAE Corporate Tax requires transactions with related parties to be on arm's-length terms, with a disclosure form submitted alongside the return and documentation retained. Master File and Local File obligations apply above prescribed revenue thresholds. Where the franchisor is genuinely third party and the rate was negotiated commercially, the arm's-length question is straightforward but should still be documented. See transfer pricing.
Want this handled properly?
Tell us how your store trades — the mall, the lease, the payment channels. We will scope the work and quote a fixed monthly fee.
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