Category 14: Franchises
This category includes emissions from the operation of franchises not included in scope 1 and scope 2.
A franchise is a business operating under a license to sell or distribute another company’s goods or services within a certain location.
A franchisor is a company that grants licenses to other entities to sell or distribute its goods or services in return for payments, such as royalties for the use of trademarks and other services.
A franchisee is a company that operates franchises and pays fees to a franchisor.
This category is applicable to franchisors. They should account for scope 1 and scope 2 emissions that occur from the operation of franchises.
Franchisees can either:
include emissions from operations under their control in this category if they have not included those emissions in scope 1 and scope 2, or
report upstream scope 3 emissions associated with the franchisor’s operations (scope 1 and scope 2) in category 1 (Purchased goods and services).
There are two methods that should be used to calculate emissions from franchises:
Franchise-specific method. This method involves collecting site-specific data from franchises.
Average-data method. This method involves estimating emissions for each franchise or group of franchises using average statistics such as average emissions per franchise type or floor space. It’s used when site-specific data from franchises is not available.
Method 1: Franchise-specific
This method involves collecting scope 1 and scope 2 emissions data from franchises, if they have already estimated emissions. If they haven’t, the franchisor can obtain fuel and electricity consumption data and estimate the emissions themselves. If the franchisee delivers business for multiple business and their calculated emissions are aggregated, emissions should be allocated to the reporting company.
The activity data to be obtained from franchises includes:
Scope 1, scope 2 and scope 3 emissions (optionally).
Site specific fuel and electricity consumption data, as well as process and fugitive emissions activity data if the franchise has not already calculated it’s scope 1 and scope 2 emissions.
This data can be sourced from public GHG inventory reports, utility bills, purchase records, meter readings and internal data systems.
If the franchisee has not calculated scope 1 and scope 2 emissions already, while obtaining data on fuel and electricity consumption use, they should also collect site or regionally-specific emission factors for energy sources per unit of consumption e.g. kg CO2e/kWh (for electricity consumption) and CO2e/litre of diesel (for fuel consumption). Additionally, they should obtain emission factors of process emissions and fugitive emissions (e.g., refrigiration and air conditioning) and upstream emission factors.
To calculate emissions from franchises, franchisors should just aggregate scope 1 and scope 2 emissions for all franchises.
If emissions have to be allocated, this can be done using the formula below.
If the franchisor has a large number of franchises under it’s belt, it’s not feasible to collect information from all of them. In this case, the company should obtain a representative sample of the franchises and estimate emissions using this sample.
One way to obtain a sample is to first group the franchises based on similar anticipated emission intensities. The franchises can be grouped based on factors such as location, building type, floor space, financial turnover, product volume, customer numbers, etc.
Once the franchises have been grouped together, a sample should be selected from each group and emissions from this sample calculated. Afterwards, the calculated emissions should be extrapolated to get an estimate of the group’s emissions. Finally, these emissions should be aggregated to obtain the overall total emission estimate. The formula to obtain emission estimates at group level and the overall estimate is shown below:
The image below demonstrates the process of calculating emissions from franchises, where the franchisor has only 5 franchises under their wing.
Method 2: Average-data
When the franchisor cannot obtain activity data from franchises, they can estimate emissions using average statistics. The two approaches that can be used to estimate emissions using this method include:
Estimating emissions based on occupied floor space by building type
Estimating emissions based on number and type of franchises
Companies may obtain activity data depending on the type of franchise. Generally, the data to be obtained includes the floor space of each franchise, the number of franchises by building type, and the number of franchise assets that give rise to GHG emissions (e.g.company cars, trucks, etc).
The emission factors needed here also depend on the type of franchise, but generally include:
Average emission factors by floor space, expressed in units of emissions per area per time period e.g. kg CO2e/m2/day.
Average emission factors by building type, expressed in units of emissions per building per time period e.g. kg CO2e/small office block/year.
Emission factors by asset type, expressed in units of emissions per asset type per time period e.g. kg CO2e/car/year.
These emission factors can be obtained from industry bodies, national statistics published by government agencies, and other administration sites.
The formula for calculating emissions from franchises when floor space is available is shown below.
If the floor space is not available, emissions can be calculated using the following formula.
An example showcasing how emissions from franchises can be calculated when the floor space is available is shown below.
