Master Franchisee - Royalty Collection from Sub-Franchisee & Remittance Split
Recording the master franchisee's collection of royalties from sub-franchisees and the split between the master franchisee's retained portion and the amount remitted to the head franchisor.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cash & Cash Equivalents | Asset (+) | 170,000.00 | - |
| Sub-Franchisee Royalties Revenue (Master's Share - 3%) | Revenue (+) | - | 85,000.00 |
| Royalties Payable to Head Franchisor (3%) | Liability (+) | - | 85,000.00 |
💡 Accountant's Note
The master franchisee recognizes only its retained share of sub-franchisee royalties as revenue. The portion owed to the head franchisor is immediately recorded as a payable upon collection. Total sub-franchisee royalties collected (6%) are split 50/50: $85,000 retained by master (3%) and $85,000 payable to head franchisor (3%). The master franchisee's income statement only shows its net retained royalty share.
Practitioner & Systems Framework
💻 ERP Architecture
Set up a payable account specifically for head franchisor remittances. Remit per the schedule in the master franchise agreement (typically monthly). Maintain detailed records of all sub-franchisee royalties collected for head franchisor audit rights purposes.
⚠️ Audit Flags
Auditors of the master franchisee verify the royalty split calculation and that the head franchisor payable is remitted on time. Late remittances typically accrue interest per the master franchise agreement.
📄 Required Documentation
Master franchise agreement royalty split provisions, sub-franchisee royalty reports, master franchisee royalty remittance schedule, payment confirmation to head franchisor.
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