How do I successfully franchise my business?

There are some common factors among successful franchise networks. Running a successful network requires careful planning and execution. Importantly, some of the most common features of franchise networks include:

  1. Successful franchisors are picky with whom they grant franchises to: I once had the privilege of sitting down to lunch with the CEO and founder of one of Australia’s most well-known franchise brands. One comment that he made has always stuck with me ‘of the applications we receive from prospective franchisees, we interview about 2% and of that 2% grant 1 in 4 a franchise”. While such selectiveness may seem limiting, the simple fact is franchisees will be ambassadors for your brand, and having franchisees that do not have the required skills, drive, attitude and/or qualifications could lead to franchisee failure and potential disputes. Franchisors should have clear selection criteria, undertake due diligence on their prospects, and meet with prospects to ensure they are a good fit for the brand. Even if this results in slower growth, having a network of happy and successful franchisees will be worthwhile in the long run;
  2. Successful franchisors are not fad-driven: we all remember the cronut phase, right? (or am I just showing my age?). Once the treat of the moment, I can’t remember the last time I saw these for sale, let alone ate one. So it’s fair to say any cronut-based franchise may not be trading as well now as they did at the height of the phase. For a franchise to work, it needs to have longevity. That means offering a product or service that will be needed or wanted in the long term. Consider the surge in popularity of escape room experiences a few years ago. While they captivated audiences and became weekend entertainment staples, the trend eventually subsided, and now you might not find as many dedicated escape room franchises. Franchisors aiming for sustained success should be cautious about embracing short-lived trends. Instead, they should focus on providing goods or services that have enduring appeal, ensuring the franchise remains relevant and profitable over the long term.
  3. Successful franchisors listen to and collaborate with their franchisees: franchisors should view the franchise arrangement as a partnership, and not a master-and-servant-style relationship. While, in reality, franchise agreements typically yield a lot more power to the franchisor than the franchisee, franchisee feedback and suggestions can be invaluable to a network. Not only because, as the ‘people on the ground’, franchisees are seeing what works and what doesn’t, but also because keeping franchisees happy is important. And no one is happy if they feel ignored.
  4. Successful franchisors embrace change: the world is ever-evolving, and franchisors need to continually review their offering and processes to ensure they remain up to date. Franchisors also need to embrace technology. Could you imagine if Pizza Hut had remained available only by going in-store or dialling 481 11 11 (a number permanently etched in my brain)? No doubt the business would be failing or, at least, losing market share to companies who embraced online ordering systems. On the flip side, brands like Domino’s who have invested heavily in technology (a drone delivering my pizza, who would have thought it!) often reap the rewards of such investments.
  5. Successful franchisors crunch numbers: I can’t count the number of times new franchisors have asked me ‘What initial fee should I charge?’ or ‘What percentage sounds good for an ongoing royalty?’. In response to those questions, my response is always the same: ‘I can guide you as to the range that is market standard, but you need to do the numbers; prepare detailed cash-flow forecasts, profit and loss and balance sheets to ensure your fee model means everyone wins’. Preparing detailed financial models, and continually revising those models to ensure they remain accurate, is absolutely 100% essential. Ideally, franchisors want to ensure their model means franchisees will be breaking even in a reasonable period having regard to the term of the franchise, that they can derive a good income from the franchised business and that there is a buffer for an increase in base costs (as well as the franchisor benefiting financially from the arrangement, of course). And once those numbers are crunched, franchisors should not just put them in the drawer, but continually revise and cross-reference against actual data collected from franchise operations. An experienced franchise accountant is an invaluable resource to franchisors.
  6. Successful franchisors understand the importance of kindness: I have seen some shocking behaviour on the part of franchisors in my time as a lawyer (not by my clients, of course!). Things like promising the world, but never having the ability to deliver, increasing fees without regard to the financial ramifications on franchisees, and issuing breach notices for minute or trivial matters, simply to exert pressure on franchisees to exit the system. At its core, all businesses are operated by people, and all people experience ups and downs, and appreciate being shown empathy. Franchisors should never understand the impact of being fair and decent and showing understanding when a franchisee may be facing an issue.


While there is no magic formula for franchise success, having regard to what has helped and hindered other franchise brands provides valuable insight. If you are a franchisor who would benefit from a highly experienced and commercially savvy franchise lawyer, we would love to help contact us.

Disclaimer: This article contains general information only and does not constitute legal advice. Magnolia Legal disclaims any liability arising from reliance on this article. Our terms of use apply