Guide
Unit economics before royalty percentages
Why fee design should start with a healthy franchisee P&L, not a target revenue number for the franchisor.
Many expanding brands reverse-engineer royalties from head-office budgets. That approach often leaves franchisees with thin margins and fragile goodwill.
Start instead with a realistic franchisee profit and loss. Include labour at award rates, local rent assumptions, marketing spend, and a living wage for an owner-operator where that is the model.
Only after that baseline is healthy should you layer establishment fees, royalties, and marketing levies. Each fee must leave room for debt service if equipment or fit-out is financed.
Stress-test slow months. Seasonal businesses in regional Australia need fee structures that survive quiet quarters without constant royalty holidays.
When numbers look tight, reduce scope of the franchise offer or delay franchising until company stores prove stronger margins. Protecting franchisee viability protects the brand.