RGIS–The Single Source Solution?
SEI recently made the decision to change to a single source vendor to provide the quarterly mandated audits of franchisee stores. What is concerning is that RGIS was not one of the top companies recommended by the Audit Selection Task Force that reviewed the audit process and interviewed the audit companies that participated in the Request for Proposal process in 2010.
One of SEI’s criteria at that time was the need for two audit companies in order to not put all of our stores in one basket. How times have changed! One other concern was the training program and the aggressive rollout schedule of the companies under consideration. The current management seems to be ignoring these concerns with the selection of RGIS as the nationwide provider of audit services.
Franchisees fear the audit. The results of the quarterly audit can ruin the livelihood of a franchisee and may even occasionally cause a franchisee to lose a store. SEI seems to be callous to the impact an audit can have on a franchisee and his or her family. The Asset Protection personnel say the new Scan Audit process does not change the outcome of an audit, that the results would be the same with a Financial Audit versus a Scan Audit.
What is ignored is the competency of the audit team. Many team members seem to be arrogant in their approach to scanning the store. The initial walk-through protocol often is skipped and every step is an interruption to achieving the end result, which is getting to the next store so they can go home. True, a Scan Audit may not produce a different outcome when compared to a traditional Financial Audit. However, the availability of additional tools to verify a count of a section is tantalizing to the franchisee, but it seems the auditors are in such a hurry that entire shelves are skipped. Pizza is counted as a whole pizza instead of one slice. The sections that SEI does allow to be printed and verified have numerous errors, and the retail may be correct, but the item count is incorrect. A whole box of a hot food item is counted as one unit because the auditor relies on the scan write-off sheet instead of counting units in an inventory count.
Additionally, there seems to be a great deal of confusion as to how to handle vendor deliveries during and after the audit. I wrote an Avanti article previously about SEI’s refusal to account for pending invoices for charges or credits, and how this can greatly affect the results of the audit and the financial impact on the franchisee and their financial well being.
When the BT stores do their cycle count, the errors are brought to light. In my store there were 16 out-of-stocks in the candy section, while the out-of-stock report only listed two. There are dozens of negative numbers for dozens upon dozens of items. Unfortunately, it is too late to correct the audit when the store does the recommended cycle count and discovers the errors.
Franchisees do have the contractual right to request a re-audit within 72 hours of receiving their audit results, and if the audit is changed by more than one percent, the franchisee does not pay for the audit. This is a recourse every franchisee needs to avail themselves of. There is no discussion about the availability of the audit company—it is your contractual right!
One has to wonder why SEI will not let franchisees have the tools to review any section of the store requested. What is SEI afraid of franchisees discovering? All we want is to run our stores efficiently so we can generate higher sales and profits. After all, healthy franchisees beget a healthy 7-Eleven system.