Franchise systems can expand their network and also ensure the reliability of their franchisees by incentivising multi-unit ownership, says Kevin Bugeja, managing director at Franchise Selection.

“Many [franchisors] are saying they can’t find franchisees. But if they’re looking after their existing franchisees they should be able to still keep growing within their internal system, by offering incentives to their existing franchisees. And I think that has a spin-off effect, because the rest of the market sees it as a positive if your franchisees own more than one store.”

He uses homewares franchise, Matchbox, as a prime example. “They actually give a reduction of about 20 percent. They charge $40,000 for a new store and $35,000 for a second one, so it’s not a major incentive, it’s a small discount that they give on the franchise fee as an acknowledgement for franchisees buying a second store.”

Out of the 26 Matchbox stores, 17 are franchised: one franchisee has five outlets, one has three and two have two.

“I’m impressed with their ability to grow in a tough economy,” Bugeja says. “If they hadn’t been running their business as they have been and had they not been as profitable, their growth would have been almost non-existent.”

Bugeja warns franchisees not to be lured by franchise systems offering long term discounts or reduced royalty fees, arguing that a one-off discount on the franchise fee should be appealing enough. Any more than that and it could be a sign that the franchise is in distress.

“Most incentives are designed to get more units into the franchise. If their model is a sound model, there’s really no need to have to continue discounting. If they’re needing to do that to survive, then they probably need to go back and look at their model.

“If they’re discounting the upfront franchise fee, they’re giving themselves the opportunity to increase brand awareness by opening another outlet, they’re giving themselves the opportunity to increase buying power for the rest of the group, and they’re increasing their royalty income to the group by bringing on another outlet. So there’s no real disadvantage other than the fact that the upfront fee is either waived or reduced or financed so they can get those other benefits into their franchise model.”