Franchising can be a powerful way to grow a business. It can enable faster expansion, wider market coverage and stronger local execution than many company-owned models. But growth without the right preparation can do more harm than good.

Franchising can be a powerful way to grow a business.

It can enable faster expansion, wider market coverage and stronger local execution than many company-owned models. But growth without the right preparation can do more harm than good.

The concept of Responsible Franchising, promoted by the International Franchise Association, highlights a set of practices that help franchisors and franchisees build long-term value, protect equity, and support sustainable returns. I first heard it at an IFA Convention and World Franchise Council meeting in 2023.

The practices are directed at established franchised networks and include:

1. Setting clear goals and expectations during the pre-sale period so that franchisors and franchisees are aligned as to terms of their long-term relationship.
2. Connecting prospective franchisees with the right opportunity through due diligence and validation of all parties in the franchise sales process.
3. Ensuring that franchisors and franchisees commit to their respective operational obligations to protect both the brand and the franchisee’s equity in their business.
4. Focusing collectively on driving unit economics and profitability for all parties.
5. Embracing collaboration among the franchisor and franchisees through open communications with franchise advisory councils and independent franchisee associations when modifying standards to respond to changing market forces and consumer preferences.

These are all great practices and will foster better long-term franchisee and franchisor outcomes and relationships.

While this concept is often applied to mature systems, I believe the most important decisions are made well before a franchise network begins.

Responsible Franchising Starts with Responsible Setup

The foundation of a responsible franchise system is not the first franchise agreement. It is the feasibility study and planning process that comes before it. Too often this stage is overlooked or rushed, but it is here that a business determines whether it is truly franchisable, and how the structure should be configured to work well for both the franchisor and franchisees – long term.

A sound franchising feasibility study does more than provide a yes or no answer. It evaluates and sets the financial, operational and structural elements needed for long-term performance. This includes the return potential for both franchisor and franchisee, the investment in support systems, and the way resources and responsibilities are shared. Every decision made here influences future agreements, manuals and relationships.

When done properly, this early planning ensures that expectations are clear, the support offer is real and workable, and the right franchisees can be selected and prepared for success.

Applying Responsible Franchising from the Outset

Responsible Franchising is often discussed in terms of network improvement. But the same principles can, and should, be applied during initial franchise development. Franchising responsibly, will help practicing Responsible Franchising.

How Franchising Responsibly helps Responsible Franchising

A strong franchising feasibility study, implementation plan, legal and franchise manual development, involving time and investment, will lay the foundations for communicating clearer business model, investment and franchise support expectations to potential franchisees. This helps ensure clear franchisee-franchisor alignment pre-sale. This work also establishes clarity on the attributes needed by future franchisees that, in turn, will better target, self-select, and provide validation for appropriately matched franchisees.

A strong franchise system development will help ensure deeper specificity and clarity over what both franchisees and the franchisor practically need to do. Ensuring these are codified in agreements, manuals and other systems and management practices will strongly support operational obligations to protect both the brand and franchisee and franchisor equity.

Strong franchise system development upfront also includes a great focus on unit-level economics, and franchisor economics. In turn, the franchise development will include a focus on how to practically work with franchisees to plan and support their profit and investment returns. This is a nuanced and important area requiring great franchisor knowledge and leadership.

Finally, strong franchise system development sets the groundwork for communication, collaboration and change management (a challenging area for franchise systems), including underlying franchise agreement, manual, franchisor processes, and franchise executive training.

Do It Once, Do It Right

At Franchize Consultants we often say, do it once, do it right. That starts with assessing whether franchising is the right path for the business. If it is, then the next step is to plan and structure the system with care. This includes the development of manuals, agreements, tools and training needed to support successful franchisee outcomes.

The best systems are those that have been thoughtfully built. They are systems where roles are understood, relationships are well managed, and profitability is shared. These systems do not rely on good luck or short-term sales. They are designed to scale and support both franchisor and franchisee into the future.

Franchising can bring great value, but only if approached with seriousness, planning and a clear understanding of what success looks like for all involved.

Working with Franchize Consultants means drawing on over 35 years of specialist experience in New Zealand franchising. We’ve helped develop, structure and improve franchise systems across a wide range of industries — from small startups to major national brands. Our expert team provides the depth of insight, process and practical tools franchisors need to build a franchise system that performs well and stands the test of time.

Franchising Responsibly will help you to practice Responsible Franchising.

Dr Callum Floyd – CFE

Managing Director
Phone 09 523 3858
Email callum@franchize.co.nz
Address 27 Gillies Avenue, Newmarket, Auckland.

Contact Franchize Consultants if you would like to discuss franchising your business. We’d be very happy to sit down with you to understand your business and objectives. You can also follow us via LinkedIn, Facebook, Instagram and Google.