Scaling Your Business: Part 2 - The Rewards, Risks, and Realities of Franchising
In Part 1, we outlined how to evaluate your goals, readiness, and options for scaling your business, from distributorship to licensing and franchising. If franchising feels like the right path for you, this second part explores its rewards, risks, and realities.
Franchising is a powerful growth strategy, enabling businesses to scale quickly by partnering with motivated entrepreneurs. However, it’s not a shortcut to success. Franchising demands extensive preparation, compliance, and a proven business model.
If you’re considering franchising, here’s what you need to know to lay a solid foundation and avoid common pitfalls.
Profitability and Capital: The Non-Negotiables
Before franchising, ask yourself:
Is your business among the top performers in your industry? If your business isn’t profitable, franchising will be a tough sell. Franchisees need to see a clear and compelling ROI.
Do you have the resources to build a franchise program? Developing a franchise system requires capital and expertise for legal compliance, operations manuals, marketing, recruitment, and ongoing support.
💡 What is ROI?
In franchising, ROI (Return on Investment) measures the profit generated from a franchisee’s initial and ongoing investment. It indicates how efficiently the franchise system turns investment into financial returns, helping assess the business's performance and viability.
Compliance: Essential for Trust
Some businesses attempt to bypass the Franchising Code of Conduct by labelling arrangements as licensing. This is a risky move. If it looks like a franchise and operates like a franchise, it falls under the Franchising Code of Conduct. Compliance isn’t optional. It’s not just about avoiding penalties, it’s about building trust and transparency with franchisees.
Are You Ready to Franchise?
A common mistake is franchising before stepping back from daily operations. Franchising requires you to work on your business, not in it.
Ask yourself:
Do you have the time and resources to dedicate to franchising?
Can your team manage the business without you?
Additionally, if you can’t manage two or three profitable corporate locations, how can you expect franchisees to succeed?
“Franchising requires you to work on your business, not in it.”
Your Next Step
To evaluate whether franchising is the right path for you, download our free Franchise Readiness Checklist. It’s a simple yet effective tool to help you assess your preparedness and set the stage for success.
Why Corporate-Owned Locations Matter
Even if franchising is your ultimate goal, corporate-owned locations are invaluable for:
Cash Flow and Stability: These locations provide consistent revenue to sustain the business.
Proof of Concept: They demonstrate that your system works.
Testing and Innovation: Corporate locations are your testing ground for innovation and proof that your system works.
While managing a large corporate network in Australia, with its vast distances and high labour costs, is challenging, franchising offers a scalable solution.
The True Cost of Equity Sharing
Founders often consider equity sharing to raise capital. While it seems like an easy solution, it comes with downsides:
Loss of Control: Sharing equity reduces your influence over decisions.
Conflicting Goals: Shareholders may prioritise profits over long-term brand growth.
Higher Costs: In the long run, equity financing can be more expensive than other funding methods.
Franchising, when done right, allows you to scale without diluting ownership or control.
Why Franchising Works
A well-structured franchise system can generate millions in interest-free capital by granting franchises one location at a time. This enables founders to retain full equity and control.
Franchising offers scalability, shared investment, and a network of motivated franchisees who are invested in your brand’s success. But it’s not a quick fix. It requires careful planning and execution.
As I often say: “Every franchisor gets the franchisees they deserve.” The quality of your network reflects the effort and care you invest in building it.
For the right business, franchising can be transformative. Take the time to assess your readiness, refine your systems, and prove your model. This is how you create a platform for sustainable, impactful growth.
In Summary
Franchising has helped countless Australian businesses grow into national and international success stories. It’s one of the most effective strategies for creating significant enterprise value in the 21st century.
At DC Strategy, we’ve guided clients on this journey, helping them build networks valued in the tens and hundreds of millions of dollars. Many started with a single location and are now thriving, with valuations between $10 million and $50 million—and beyond.
Franchising isn’t for everyone, but for the right business, it can unlock extraordinary opportunities. With the right strategy, support, and preparation, you too can achieve transformational growth.
- Rod Young
About Rod Young
Rod Young is considered one of the world’s leading franchise consultants.
He is the founder and Chairman of DC Strategy, Australasia’s premier franchise advisory group.
He is also the Executive Chairman and Global CEO of Cartridge World, the 60 country, 1400 store global printer, cartridge and printing supplies network, and sits on the board of several leading and emerging domestic and international franchise networks.
DC Strategy develops franchise networks and brands, providing franchise consulting and legal advice, branding, marketing and online presence, franchisee recruitment and international strategy.