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What makes a successful Franchise system in 2026?

What makes a successful Franchise system in 2026?

January 9, 2026

Taya Foxman

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Published

9 January 2026

Category

Franchising, Commercial

A New Year, a new opportunity, another new franchise system awaits!

Is it just having a strong brand and presence in the market, good systems and a product or service that consumers want or need? Businesses need to embrace new technology and provide quality products or services while operating in a competitive market.

The key reasons we see some franchise systems fall over tend to be inadequate planning and investment by the franchisor and failing to get specialist advice. You cannot build the plane while it is flying it will likely crash!

It should be acknowledged that often a franchisee will fail due to their own actions and it is not the fault of the franchisor or its system, the franchisee may have just selected the wrong franchise for them, or they decided not to follow the system which led to their demise.

The building blocks to establishing a successful Franchise system in my view are the following:

a) Legal and financial advice

Prospective franchisors should do their own homework to understand the complexities of establishing a franchise system and then consider if the franchise model is the right model for expansion.

We work with our clients to explore all options before deciding to proceed with a franchise model for example, it could be more suitable to bring on a new management team or offer employees profit or equity or bringing on new investors or offer a License arrangement.

b) The right corporate structure

Like building a house you need to get the corporate structure right and we assist our clients with establishing the right corporate model (working with your accountants) which will:

i. Protect the existing business from the risks of the franchise model.

ii. Protect the IP in a separate holding entity.

iii. Consider capital gains tax issues, on eventual sale of the franchise entity.

iv. Protect the directors personal assets (as much as possible).

c) Financial Modelling

Before going to market it is vital to do financial modelling on the proposed franchise.

On the Franchisor side, you need to determine what fees will be charged such as the Franchise fee and royalty or any margin on supply of goods and consider if you need a separate marketing (special purpose) fund. This will then determine the revenue and profit for the franchisor.

Simply guessing what fees to charge is a recipe for disaster, as once the fees are set it is not easy to revise them.

On the Franchisee side, franchisors need to ensure that the model works for the franchisee.

This is even more crucial due to recent Franchise Code changes that require a franchisor to give franchisees a “reasonable opportunity” to make a return on their investment.

What does this mean?

That the fees charged by the franchisor (usually based on the franchisees gross revenue) are reasonable and enable the franchisee to:

 

  1. Take a reasonable salary, for their effort
  2. Pay the franchisors fees, and the franchisees own operating costs.
  3. Cover any financing arrangement and get a return on their investment on eventual sale – this is generally done by building goodwill value in the business.

 

A franchise that requires a $600,000 capital investment or more will likely take longer to get to profit as opposed to a smaller investment mobile franchise.

Businesses that operate on a membership model or that have secured customer contracts that are recurring provide predictable cash flows for the franchisee.

d) Commitment to the brand and systems

The franchisor needs to offer franchisees the latest technology for ease of operation, which now includes use of AI for rostering, inventory control, and data analysis of consumer behaviour, financial reporting, payments and benchmarking. They need to show seamless integration between e- commerce and in-store operations including for virtual storefronts.

The above is a substantial financial commitment by the franchisor so on the franchisee side they need to ensure they adhere to and use the systems.

As we say Franchisees need to be a force for good not evil! If a franchisee has difficulty playing by the systems and rules, this will create tension and conflict.

e) Values and Sustainability

Franchisors need to show they are complying with their environmental and social governance obligations (ESG) and sustainable development goals (SDG’s), dealing with waste reduction, local sourcing, and renewable energy to win consumer trust.

 

f) Compliance Management

Franchisors and franchisees are bound by the Franchise Code and their Franchise Agreement and apart from that, there are a myriad of other laws businesses need to comply with such as the Australian Consumer Laws (ACL) that protects consumers, the Fair Work Act 2009 to protect employees and other licensing and regulations relevant to their business. Therefore, both franchisor and franchisees need to ensure they have compliance systems in place and build compliance into their daily operations rather than doing it as a once-a-year checklist.

g) Relationship Maintenance

Like any relationship people want to feel valued so it is important that franchisors act reasonably and fairly. This means they should be transparent and concerned about the success or otherwise of their franchisee. Establishing a Franchise Advisory Committee (FAC) can help once the system grows.

At the same time all parties need to act in good faith and be open, professional and respectful in their communication to resolve any disputes even before the parties head off to dispute resolution.

Franchisors need to be selective in their choice of franchisee to ensure that they align with the franchisors values and have required base skills.

h) Know your market, know your competition

We often see overseas franchise systems that come into the Australian market without a proper business entry plan and with little knowledge of the Australian market, so knowing your market, knowing your consumers in that market, and knowing what your competitors are doing is essential.

Summary

As a new or incoming Franchisor into the Australian market if you follow the above steps, you are likely to limit your risks and establish a successful presence in the market.

At Sanicki Lawyers, we have consultants that assist our new local and overseas Franchisors to ensure they take all steps to ensure a successful roll out of their system.

Contact: Sanicki Lawyers – Franchise Licensing & Distribution Group
Robert Toth I Special Counsel I Accredited Commercial & Franchise Law Specialist

robert@sanickilawyers.com.au | mobile: 0412673757

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