A franchise relationship should be symbiotic – one of mutual dependency and benefit. The regulatory framework is built around the core expectations of franchisor and franchisees:

• responsible franchisor disclosure and behaviour
• effective franchisee due diligence and ongoing effort.

The relationship is inter-dependent - so collaboration and open communication are important.  A franchisor and its franchisees need each other to both be financially successful.

Good franchisors spend the early years getting their model and systems right and understanding their customers. A good franchise system brings all the know-how and expertise to the business, and franchisees add their local market insights, business acumen, energy, and capital. 

Prospective franchisees should explore and understand different franchise models and the commitments that come with being a franchisee, and if they are a good ‘fit’ for what is expected. Research whether the franchise is offering a proven business model or an entirely new proposition and understand what the benefits and challenges are. For example, check if the business has been successful elsewhere and talk to those franchisees about their experience with the system, how they are going, and what it takes to succeed.

For franchisors, one of the most important phases of a successful franchise is recruitment. Relationships are key and will evolve over the course of the franchise agreement. Relationships with franchises can impact everything from profitability, brand reputation and business culture to insolvency predictability. Franchisors need to recruit franchisees who are the right fit, understand what they are investing in, and have the right skills and business acumen to drive ‘unit’ success and profitability. If time working in the business is essential, make that clear and be open about this requirement’s impact on multi-unit franchise ambitions.