You have been hired as a consultant. So all you have to do is consult. Do some research on the role of consultant. Also, you may want to clarify with the franchise owner exactly what s/he expects from you.
As I see it, from the limited amount of information presented here, now is the time for you to write a report that outlines the situation and your recommendations. Focus on the facts. Document what you have seen. Keep your analysis of the situation separate. Present your report to the franchise owner and await a directive. Where does s/he want to go in light of your feedback?
Sadly, it seems that mismanagement has become the status quo for many American businesses. However, it is the businesses who have quality management and customer service that will be able to thrive in these difficult economic times.
The franchise owner brought you in because s/he knew that there was a problem. Will s/he want to do what it takes to clean up the business and take it to the next level? Or will s/he simply abdicate his/her position and let things deteriorate?