Preparing Franchise Earnings Information in Australia

A profitable existing business gives you useful evidence, but it does not automatically show what a franchisee will earn. Before sharing sales figures, profit examples or forecasts, establish what those numbers actually demonstrate. Preparing earnings information carefully helps prospective owners assess the opportunity and builds trust within your franchising community.

Understand the rules before sharing figures

Australia’s Franchising Code of Conduct is a mandatory code under the Competition and Consumer Act 2010. It regulates franchise relationships and disclosure obligations. The Australian Consumer Law also prohibits misleading or deceptive conduct, including in dealings between businesses.

These obligations matter whenever you discuss financial performance: in presentations, spreadsheets, advertisements, emails and conversations. A technically correct sales figure can still create a misleading impression if you leave out essential context, such as unusually low rent or substantial unpaid work by the founder.

Forecasts need particular care. Representations about future matters require reasonable grounds; an optimistic assumption does not become reliable simply because it appears in a financial model. A disclaimer is not a substitute for supportable claims.

Have a specialist franchise lawyer check how any earnings information must be handled under the Code’s disclosure requirements. Ask an accountant to review the calculations and supporting evidence. These are different tasks, and both should happen before figures reach prospective franchisees.

Separate existing results from franchisee economics

Start with reconciled accounts for your existing business, not a selection of impressive trading weeks. Identify the period covered, the location and whether figures include GST. Explain unusual events, temporary closures and changes in opening hours that affect comparisons.

Then distinguish historical performance from adjustments intended to illustrate franchise operation. Your existing outlet may benefit from conditions that another owner cannot reproduce.

Check for:

• Founder labour that has not been charged at a realistic cost.
• Family members working unpaid or below normal employment costs.
• Rent concessions, owned premises or favourable legacy leases.
• Supplier discounts that depend on purchasing volumes unavailable to a new outlet.
• Central administration or marketing costs paid elsewhere in the business.
• Franchise fees and other ongoing charges that your own outlet does not currently pay.

Keep actual results and adjusted illustrations in separate columns, with an explanation for every adjustment. Do not describe a reconstructed franchisee profit figure as an actual result.

Define financial terms consistently. Turnover, gross profit, operating profit and cash available to an owner are not interchangeable. State how owner remuneration, interest, depreciation and tax are treated, so readers can see what each figure excludes.

Build forecasts around visible assumptions

If you decide to provide forecasts, make their assumptions available for scrutiny. Useful inputs include customer numbers, average transaction value, opening days, staffing hours, occupancy costs and the expected time needed to establish local demand.

Show how these inputs connect. For example, higher projected sales may require extra staff, longer opening hours or additional delivery capacity. Increasing revenue while leaving every operating cost unchanged can produce an unrealistic picture.

Test less favourable conditions as well as the central case. Consider a slower opening period, lower customer demand or higher wage costs. Explain that these are scenarios, not promises or a statement of the worst possible outcome.

Also distinguish profit from cash flow. A business can report an accounting profit while struggling to fund stock, loan repayments or tax payments. Encourage prospective franchisees to obtain independent advice on their own financing and household needs rather than treating an outlet illustration as a personal income forecast.

Make comparisons honest and useful

A single mature outlet may offer limited evidence about a new location. Explain differences in catchment, competition, premises, trading history and owner involvement before suggesting that results are transferable.

Where you have several outlets, avoid presenting only the strongest performer as representative. Explain which outlets were included, which were excluded and why. If you use an average, consider whether it conceals a wide spread of results or combines new outlets with long-established businesses.

Create a consistent presentation format containing:

• The source and period of the underlying data.
• A clear distinction between historical results and forecasts.
• Definitions of the financial measures used.
• Material assumptions, exclusions and limitations.
• The date the information was prepared.

This makes questions easier to answer without allowing the story to change between conversations.

Control what your team says

Give everyone discussing the opportunity the same approved financial material. Train them not to improvise payback periods, promise owner income or describe projected results as guaranteed.

When a prospect asks a question the figures cannot answer, record it and obtain a checked response. Review the material when costs, trading conditions or the business model change, and withdraw outdated versions from use.

Practical takeaway: Before sharing earnings information, reconcile the evidence, expose the assumptions and obtain accounting and legal review. If a claim cannot be explained and supported, do not use it.