For many Aussies, franchising seems like the perfect path to business ownership: the brand is established, the systems are there, and support is promised every step of the way. But here’s the catch—not all franchise stories end in success.
In fact, behind glossy brochures and polished websites lies a harsher reality. While the Australian franchise sector contributes over $155 billion to the economy annually and employs nearly half a million people (Franchise Council of Australia), not every franchisee makes it past the first two years.
So, what separates the thriving few from the ones who quietly shut their doors?
Let’s uncover the most common reasons franchises fail—and more importantly, how you can avoid becoming a statistic.
The Reality Few Talk About
Take Steve*, a mid-40s marketing executive from Melbourne who poured his savings into a fitness franchise. The franchisor promised marketing support, training, and a brand “ready to explode.” What Steve didn’t realise? The territory was saturated, his location got minimal foot traffic, and the training barely skimmed the surface. Within 18 months, Steve was back in a 9-to-5, burdened with $80,000 in debt.
His story isn’t unique.
The failure rate for franchises in Australia isn’t officially tracked—but anecdotal data and media reports suggest it’s higher than many think. According to a report by Griffith University, issues such as franchise disputes, unfair contracts, and underperformance have been rising steadily.
Why Franchises Fail: 5 Brutal but Preventable Pitfalls
1. Poor Due Diligence
Many first-time franchisees rush in emotionally. They fall in love with a brand without examining the business behind the logo. Did you speak to other franchisees? Have you had the disclosure document reviewed by a lawyer? Do you understand the territory exclusivity terms?
🗨️ “If you don’t investigate, you’re not investing—you’re gambling.” — Bruce Billson, Australian Small Business and Family Enterprise Ombudsman.
2. Lack of Working Capital
Starting a franchise costs more than the upfront fee. You’ll need funds for fit-out, staff wages, insurance, marketing, and the first 6 to 12 months of operations—a period where many businesses aren’t yet profitable. A 2023 report by Finder found that nearly 1 in 3 small business owners run out of cash before breaking even.
🎯 Tip: Know your breakeven point. Understand what you need to sell weekly just to stay afloat.
3. Bad Locations
Location is everything—especially for retail or food-based franchises. But some franchisors push less-than-ideal locations onto new franchisees to expand quickly. Poor visibility, minimal foot traffic, or the wrong demographic nearby can be the difference between success and disaster.
📍 Case in point: In 2021, MOS Burger exited the Australian market, citing site selection and local adaptation issues.
4. Overpromising Franchisors
It’s one thing to sell a franchise. It’s another to support a franchisee. Some franchisors talk big during recruitment but fall short post-sale. Whether it’s lack of ongoing marketing, weak supply chains, or ghosting when times get tough—support matters.
🚨 Warning signs: High franchisee turnover, vague earnings claims, or reluctance to let you speak with current owners.
5. Inadequate Training and Systems
A brand name doesn’t mean a business is plug-and-play. From point-of-sale systems to local area marketing, inventory management to staffing—if the onboarding is weak, your learning curve is steep (and expensive).
📚 Look for brands that offer ongoing support, in-person training, and updated systems—not just a three-day seminar and a manual.
How to Avoid Becoming a Statistic: Real-World Franchise Wisdom
Success leaves clues. So does failure. Here’s how savvy Aussie franchisees stay ahead:
✔️ Talk to Existing Franchisees
Call at least 3 to 5 franchisees in the network. Ask about profitability, challenges, and how responsive the head office is.
✔️ Hire an Experienced Franchise Lawyer
They’ll decode the Franchise Disclosure Document (FDD) and spot clauses that could hurt you later (e.g. forced upgrades, termination rights, resale restrictions).
✔️ Pressure Test the Numbers
Create a cash flow forecast. Factor in worst-case sales. Know your fixed and variable costs. If you’re borrowing, buffer in a 6–12 month safety net.
✔️ Check the Franchisor’s Track Record
Is this their first rodeo? Have other franchisees succeeded under their system? Look for proven models, not just hype.
✔️ Seek Support-Heavy Brands
Some franchises offer full marketing kits, CRM tools, bulk purchasing discounts, and operational guidance—these extras can be the difference between survival and success.
A Final Word: Be a Detective, Not Just a Dreamer
Franchising isn’t a guarantee—it’s a business. Like any business, it comes with risk. But unlike a startup, you’re also tied to someone else’s rules, systems, and brand reputation.
The good news? With the right research, guidance, and mindset, you can dramatically increase your odds of success.
💡 “The franchisee-franchisor relationship is a marriage. Don’t say ‘yes’ on the first date.”
Thinking of investing in a franchise? Explore some of Australia’s most promising franchise opportunities at Growth Hive. Or better yet, join our Facebook group community and connect with real franchisees, experts, and aspiring business owners just like you.
Let’s turn your franchise story into a success story.
