CPA Compilation Report for Food Franchise Stores
Franchisor-compliant CPA compilation reports for Ontario food franchise stores. We prepare financial statements that satisfy Tim Hortons, McDonald's, Subway, Pizza Pizza, A&W, Mary Brown's, Popeyes, Harvey's and every major food franchisor. Royalty reconciliation, food cost analysis, advertising fund reporting, lease renewal support. From $400. 900+ five-star reviews.
Why Food Franchise Stores Need a CPA Compilation Report
Every major food franchisor in Canada requires franchisees to submit annual financial statements prepared by a licensed CPA. Most franchise agreements specify a compilation engagement (formerly called a Notice to Reader) under Canadian Standard on Related Services (CSRS) 4200. The compilation report confirms that the financial statements were compiled by a CPA from information provided by management. It is the minimum level of CPA involvement that franchisors, landlords and lenders accept.
The consequence of not submitting a CPA-prepared compilation report on time is real: franchise agreements typically allow the franchisor to issue a notice of default, charge penalties for late submission and in extreme cases terminate the franchise agreement. We prepare compilation reports specifically for food franchise stores, with the financial statement format, schedules and supplementary information that each franchisor requires. For a full overview of our compilation report services, see our CPA compilation report page.
Who Requires a CPA Compilation Report from Food Franchise Stores?
| Who Requires It | Why | Deadline |
|---|---|---|
| Franchisor (head office) | Franchise agreement requires annual CPA-prepared financial statements. Used to verify royalty calculations, advertising fund contributions, gross sales reporting and compliance with franchise agreement financial covenants. | Typically 90 to 120 days after the franchisee's fiscal year-end. Varies by franchisor. Late submission triggers penalties or default notice. |
| Landlord (lease renewal or assignment) | Commercial landlords require financial statements for lease renewals, lease assignments and percentage-rent calculations. A CPA compilation report is the minimum acceptable format. | As requested by the landlord, typically during the lease renewal negotiation window (6 to 12 months before lease expiry). |
| Bank or lender | Business loans, lines of credit and equipment financing require annual financial statements. Some lenders require review-level or audit-level engagements, but most accept compilation reports for small franchise operations. | Annually, within 90 to 120 days of fiscal year-end. Some lenders require interim statements quarterly. |
| CRA (if requested) | CRA may request financial statements as part of a corporate tax audit or review. CPA-prepared financial statements carry more weight with CRA than self-prepared statements. | Within the CRA-specified response period (typically 30 to 60 days from the request date). |
| Buyer (if selling the franchise) | Buyers and their CPAs require 3 to 5 years of CPA-prepared financial statements for due diligence. Franchise resale value depends on demonstrated profitability in auditable financial statements. | During the sale process. Missing years of CPA statements reduce the franchise's resale value and delay closing. |
Compilation vs. Review vs. Audit: What Your Franchisor Actually Requires
| Engagement Type | CPA Standard | Level of Assurance | Cost (typical food franchise) |
|---|---|---|---|
| Compilation (Notice to Reader) | CSRS 4200 | No assurance. CPA compiles the financial statements from management-provided information. No verification, testing or confirmation procedures. CPA does not express an opinion on the statements. | $400 to $1,200 |
| Review engagement | CSRE 2400 | Limited assurance. CPA performs inquiry and analytical procedures. Reviews for plausibility. Expresses negative assurance ("nothing came to our attention"). | $2,000 to $5,000 |
| Audit | CAS | Reasonable assurance. Full verification: confirmations, physical inventory counts, detailed testing. CPA expresses a positive opinion ("the financial statements present fairly"). | $5,000 to $15,000+ |
Most Food Franchisors Require a Compilation Report (CSRS 4200), Not an Audit. This is the most AFFORDABLE level of CPA involvement. We prepare the compilation report with the financial statement format, notes and supplementary schedules your specific franchisor requires. If your franchisor or lender requires a review or audit, we provide that as well, but the majority of food franchise stores need only the compilation. Read your franchise agreement carefully. If it says "compiled financial statements prepared by a CPA" or "Notice to Reader," you need a compilation report. Compilation Report Services →
Franchise-Specific Schedules We Prepare
| Schedule | What It Contains | Why the Franchisor Requires It |
|---|---|---|
| Gross sales reconciliation | Total gross sales per the POS system reconciled to the general ledger. Includes dine-in, drive-through, delivery (Uber Eats, DoorDash, Skip), catering and gift card redemptions. Sales tax (HST) backed out to arrive at net sales. | Royalties are calculated on gross sales. If POS gross sales do not match the reported gross sales in the financial statements, the franchisor investigates. Discrepancies delay approval and may trigger a franchisor audit. |
| Royalty calculation schedule | Gross sales x royalty percentage = royalty payable. Monthly royalty payments reconciled to the annual total. Any adjustments, credits or arrears identified. | Confirms the franchisee paid the correct royalty amount. Most food franchises: 4% to 6% of gross sales. McDonald's: approximately 4% + base rent. Tim Hortons: approximately 6%. Subway: 8%. Pizza Pizza: approximately 6%. |
| Advertising fund contribution schedule | Gross sales x advertising fund percentage = contribution payable. Monthly contributions reconciled to the annual total. | Most food franchises require 2% to 5% of gross sales for the national/regional advertising fund. Separately tracked from royalties. Tim Hortons: approximately 4%. McDonald's: approximately 4%. Subway: 4.5%. |
| Food cost analysis | Cost of goods sold (COGS) as a percentage of gross sales. Breakdown by food category if required. Beginning inventory + purchases - ending inventory = COGS. Waste and shrinkage tracked. | Food cost percentage is a key performance indicator. Franchisor benchmarks: 25% to 35% food cost for most QSR franchises. If your food cost exceeds the benchmark, the franchisor may require an operational review. |
| Labour cost analysis | Total payroll costs (wages, CPP, EI, WSIB, vacation pay, benefits) as a percentage of gross sales. Breakdown by position category (management, hourly, overtime). | Labour cost is the second largest expense. Franchisor benchmarks: 25% to 32% for most QSR franchises. Combined food + labour ("prime cost") should be 55% to 65% of gross sales. |
| Leasehold improvement and FF&E schedule | List of all leasehold improvements, furniture, fixtures and equipment with original cost, CCA class, accumulated depreciation and net book value. | Used for lease renewal negotiations, franchise resale valuations and insurance purposes. Landlords review this schedule when assessing the tenant's investment in the property. |
Food Franchise Compilation Report from $400. Franchisor-Compliant.
Gross sales reconciliation, royalty schedule, food cost analysis, labour cost analysis. Every schedule your franchisor requires.
What Our Food Franchise Compilation Service Includes
| Service | What We Do |
|---|---|
| Year-end bookkeeping review | We review the full year of bookkeeping entries, reconcile POS sales to the general ledger, verify inventory counts, confirm payroll totals against T4 Summary and ensure all expenses are properly categorized for franchise reporting. |
| Financial statement preparation | Balance sheet, income statement and notes to the financial statements prepared in the format your franchisor requires. ASPE (Accounting Standards for Private Enterprises) basis or cash basis as specified by the franchise agreement. |
| CPA compilation report (CSRS 4200) | The formal compilation report letter signed by a licensed CPA. This is the document your franchisor, landlord and lender require. We use the current CSRS 4200 standard (effective December 14, 2021). The old "Notice to Reader" terminology has been replaced by "Compilation Engagement Report." |
| Franchise-specific supplementary schedules | Gross sales reconciliation, royalty calculation, advertising fund contribution, food cost analysis, labour cost analysis and leasehold improvement schedule. Prepared in the format your specific franchisor requires. |
| T2 corporate tax return | Corporate tax return filed with CRA. Reconciled to the compilation financial statements. All CRA schedules included (Schedule 1, Schedule 8, Schedule 50, Schedule 100/125, GIFI). T2 is included FREE for bookkeeping clients. |
| HST annual reconciliation | HST filing reconciled to the financial statements. POS sales matched to HST collected. ITCs verified against expense categories. Annual HST return or final quarterly return filed. |
| Franchisor submission | We submit the compilation report directly to the franchisor if required, or provide you with the complete package in the format they accept (PDF, printed, or franchisor portal upload). We confirm the submission deadline and ensure timely delivery. |
| CRA audit support (FREE) | If CRA reviews or audits your franchise's corporate tax return or HST, we represent you at no additional charge. We respond to every CRA request, attend every meeting and negotiate every reassessment. FREE for every client. |
Compilation Report Requirements by Food Franchise
| Franchise | Royalty Rate | Ad Fund Rate | Financial Statement Requirement |
|---|---|---|---|
| Tim Hortons | 6% of gross sales | 4% of gross sales | CPA compilation report required annually. Gross sales reconciliation mandatory. Franchisee must submit within 90 days of fiscal year-end. Tim Hortons may request a review engagement for multi-unit operators. |
| McDonald's | 4% of gross sales (approx.) + base rent | 4% of gross sales (approx.) | CPA compilation report required annually. McDonald's also requires monthly reporting through the franchisor's financial reporting system. Compilation report must reconcile to the monthly submissions. |
| Subway | 8% of gross sales | 4.5% of gross sales | CPA compilation report required annually. Subway has one of the highest combined royalty + ad fund rates in the QSR industry (12.5%). Gross sales reconciliation critical because of the high royalty percentage. |
| Pizza Pizza | 6% of gross sales (approx.) | 3% to 4% of gross sales | CPA compilation report required annually. Pizza Pizza requires detailed delivery revenue breakdown (in-house vs. third-party platforms) as delivery has different royalty treatment in some agreements. |
| A&W | 5% of gross sales | 3% of gross sales | CPA compilation report required annually. A&W is one of the fastest-growing food franchises in Canada. Strong compliance culture. Timely submission expected. |
| Mary Brown's | 5% of gross sales | 3% to 4% of gross sales | CPA compilation report required annually. Mary Brown's is expanding rapidly in Ontario. New franchisees should establish a CPA relationship before opening to ensure compliance from year one. |
| Popeyes | 5% of gross sales | 4% of gross sales | CPA compilation report required annually. Popeyes is a newer entrant in the Ontario market with a growing franchisee base. Financial reporting follows the Restaurant Brands International (RBI) framework. |
| Harvey's / Swiss Chalet / St-Hubert (Recipe Unlimited) | 5% to 6% of gross sales | 3% to 4% of gross sales | CPA compilation report required annually. Recipe Unlimited operates multiple brands under one parent company. Multi-unit operators may need separate financial statements per location. |
We Prepare Compilation Reports for Every Food Franchise in Ontario. The franchisors listed above are the most common, but we work with every QSR and fast-casual franchise: Wendy's, Burger King, KFC, Taco Bell, Dairy Queen, Baskin-Robbins, Quiznos, Mr. Sub, Freshii, Osmow's, Paramount, Nando's, Thai Express, Smoke's Poutinerie and others. If your franchisor requires CPA-prepared financial statements, we prepare them in the exact format they accept. Compilation Report Services →
Key Financial Metrics Every Food Franchise Owner Must Track
| Metric | Formula | QSR Benchmark (Ontario) |
|---|---|---|
| Food cost % | COGS / Gross Sales x 100 | 25% to 35%. Below 25%: excellent. Above 35%: waste, theft or pricing issue. Tim Hortons: 28% to 32%. Pizza: 30% to 35%. Chicken QSR: 32% to 36%. |
| Labour cost % | Total Payroll / Gross Sales x 100 | 25% to 32%. Includes all wages, CPP, EI, WSIB, vacation pay. Above 32%: overstaffed or underpriced. Below 25%: understaffed or relying on unpaid owner labour. |
| Prime cost % (food + labour) | (COGS + Total Payroll) / Gross Sales x 100 | 55% to 65%. This is the single most important metric. Above 65%: the franchise is not profitable at the unit level. Below 55%: strong operations. |
| Royalty + ad fund % | (Royalty + Ad Fund) / Gross Sales x 100 | 8% to 12.5% depending on the franchise. This is a fixed percentage of gross sales. Cannot be reduced. Must be factored into the profitability analysis before signing the franchise agreement. |
| Occupancy cost % | (Rent + CAM + Property Tax) / Gross Sales x 100 | 8% to 12%. Above 12%: the rent is too high for the sales volume. Below 8%: strong location economics. |
| Net profit margin | Net Income / Gross Sales x 100 | 8% to 15% for a well-managed food franchise. Below 5%: the franchise is barely profitable. Owner compensation is separate from net profit in this calculation. |
Food Franchise Compilation Report: Real Client Results
Tim Hortons Franchisee, Mississauga (2 Locations)
A Tim Hortons franchisee with 2 locations and $3.8 million combined gross sales had been using a bookkeeper who prepared financial statements without a CPA compilation report. The franchisor issued a 60-day compliance notice. We took over: reconciled POS sales to the general ledger for both locations, prepared 2 separate compilation reports with gross sales reconciliation, royalty schedules and food cost analysis, filed both T2 returns and submitted to the franchisor within 28 days. Food cost was 31.2% (within benchmark). Labour cost was 29.4%. We also identified $8,400 in unclaimed ITCs from incorrectly categorized expenses.
Subway Franchisee, Brampton
A Subway franchise owner with $620,000 in gross sales was paying a previous accountant $2,800 for a compilation report. We prepared the same compilation report for $650 (including all franchise-specific schedules), identified that the royalty calculation had been overstated by $1,240 for the prior year (the previous accountant included HST in the gross sales figure used for royalty calculation) and filed the T2 with $3,200 in additional deductions the previous accountant had missed. Total annual savings from switching: $5,390.
Pizza Pizza Franchisee, Scarborough
A Pizza Pizza franchise owner needed compilation reports for 3 years (the prior CPA had retired and no statements were filed). The franchisor required all 3 years to be submitted within 60 days or the franchise agreement would be terminated. We reconstructed the bookkeeping for all 3 years from bank statements and POS data, prepared 3 compilation reports, filed 3 T2 returns and submitted everything to Pizza Pizza within 42 days. The franchise agreement was preserved. We also identified that delivery revenue from third-party platforms was being double-counted in the POS, inflating gross sales and royalty payments by $14,600 over 3 years. Compilation Report Services →
A&W Franchisee, Hamilton (Lease Renewal)
An A&W franchise owner approaching a lease renewal needed CPA-prepared financial statements for the landlord. The landlord's lease included a percentage-rent clause (5% of gross sales above $800,000). We prepared the compilation report, verified the percentage-rent calculation, identified that $42,000 in catering revenue had been incorrectly included in the gross sales base for the percentage-rent calculation (the lease excluded off-premises catering), and negotiated a $2,100 credit with the landlord. The compilation report also supported a 5-year lease renewal at a 2% annual escalation instead of the landlord's requested 4%.
10 Common Compilation Report Mistakes Food Franchise Owners Make
| # | Mistake | Consequence |
|---|---|---|
| 1 | Not submitting the compilation report by the franchisor's deadline | Franchise agreement default notice. Penalties. Repeated late submission can trigger termination proceedings. Most franchisors: 90 to 120 days after year-end. |
| 2 | Using a bookkeeper instead of a licensed CPA to prepare financial statements | Franchisors require CPA-prepared statements under CSRS 4200. Bookkeeper-prepared statements are not accepted. The franchisee must redo the work with a CPA at additional cost. |
| 3 | Including HST in the gross sales figure used for royalty calculation | Royalties are calculated on gross sales excluding HST. If $1,000,000 in POS total includes $115,044 in HST, the royalty base is $884,956, not $1,000,000. Including HST overstates royalties by 13%. |
| 4 | Not reconciling POS sales to the general ledger | Discrepancies between POS reports and the accounting records raise red flags with the franchisor. Common causes: unrecorded cash sales, gift card redemption errors, third-party delivery platform discrepancies and refund processing errors. |
| 5 | Not tracking food cost separately from other COGS | Food cost percentage is a critical franchisor KPI. If food cost is mixed with packaging, cleaning supplies and other costs, the reported food cost is inflated and may trigger an operational review by the franchisor. |
| 6 | Double-counting third-party delivery revenue | Uber Eats, DoorDash and Skip deposit net amounts (after their commission) into the franchise's bank account, but the POS records the gross sale. If the bookkeeper records the bank deposit as additional revenue, total sales are double-counted. This inflates gross sales and royalty calculations. |
| 7 | Not conducting a physical inventory count at year-end | Beginning inventory + purchases - ending inventory = COGS. Without a year-end inventory count, COGS is estimated (inaccurate). Franchisors and CRA expect a physical count. An estimated inventory count is a red flag in both a franchisor audit and a CRA audit. |
| 8 | Not keeping 3 to 5 years of CPA-prepared statements for resale | When selling the franchise, buyers require 3 to 5 years of CPA-prepared financial statements. Missing years reduce the franchise's resale value and extend the due diligence period. Some buyers will not proceed without a full set of CPA statements. |
| 9 | Not preparing separate financial statements for each location | Multi-unit franchise owners need a separate compilation report for each location. Franchisors evaluate unit-level economics. A consolidated statement across 3 locations hides underperforming units. |
| 10 | Paying $2,000 to $5,000 for a compilation report that should cost $400 to $1,200 | A compilation report for a single-location food franchise should cost $400 to $1,200 depending on the complexity and the state of the books. If you are paying more, you are likely paying for a review or audit level of work that your franchise agreement does not require. Compilation Report Services → |
Frequently Asked Questions: Compilation Reports for Food Franchises
What Our Clients Say
900+ five-star reviews from business owners and franchise operators across Ontario.
Food Franchise Compilation Report. From $400. Franchisor-Compliant.
Gross sales reconciliation, royalty schedules, food cost analysis. Every schedule your franchisor requires. CPA compilation report under CSRS 4200. 900+ five-star reviews.