Cash flow is one of the most persistent operational challenges for Australia’s 94,000 franchise owners.
No matter whether you’re opening your first location or managing a network of established sites, ongoing royalties, marketing fees, supplier payments, rent, and day-to-day operating costs like wages and utilities, the outgoings of a franchise can often outpace incoming revenue.
We explore eight practical strategies to help franchisees take control of their cash flow and build financial resilience.
The complex costs of running a franchise
Managing cash flow for a franchise isn’t just about balancing sales with supplier payments – it’s shaped by a web of recurring fees and operational outgoings. These typically include:
- Upfront investment: Franchise buy-in fees, fit-out costs, and initial stock purchases.
- Royalties: Often set as a percentage of your profits.
- Marketing and advertising fees: Mandatory contributions to national or regional campaigns.
- Operational expenses: Wages, utilities, insurance, compliance requirements, and local marketing.
- Rent: Often one of the largest, fixed and ongoing franchise costs.
- Maintenance or property upgrades: Essential for maintaining brand standards.
These fixed and variable outgoings can place a constant drain on cash flow. Even the strongest-performing franchises can experience short-term liquidity pressures, making flexible access to capital an important part of financial planning.
8 strategies for managing your franchise’s cash flow
Strong cash flow management also comes from consistent, proactive operational practices. These strategies can help you stay ahead of potential challenges and build a more resilient business.
1. Build and a cash flow forecast
A detailed financial forecast helps you anticipate shortfalls and plan accordingly. It’s particularly valuable in the early stages of a franchise, when startup costs are high, so you can keep enough cash on hand to keep operations running smoothly. It’s crucial to review and update your forecast regularly, you can spot potential problems early and take corrective action before they escalate.
2. Plan for seasonal fluctuations
Use your forecast to identify seasonal fluctuations and set aside reserves in high-revenue months to cover expenses during slower times. This forward planning helps avoid cash shortages and keeps your business financially stable year-round.
3. Manage your inventory efficiently
Avoid overstocking, which ties up valuable cash, and use “just-in-time” ordering where possible to keep inventory lean. Regularly review sales data to identify slow-moving items and adjust purchasing to match demand.
4. Optimise your staffing levels
Wages are often one of the largest ongoing expenses for franchisees. Use smart rostering tools to match staff hours to customer demand, reducing unnecessary labour costs while maintaining service quality.
5. Negotiate supplier terms
Work with suppliers to secure favourable terms, such as extended payment deadlines, bulk-purchase discounts, or rebates. Trade finance can be an effective tool to increase your purchasing power and take advantage of supplier offers.
6. Control operating expenses
Regularly review costs such as utilities and insurance to ensure you’re getting value for money. Cutting or renegotiating even small recurring costs can add up to significant annual savings.
7. Maintain a cash reserve
Keeping a modest buffer allows you to cover unexpected expenses – like equipment breakdowns or sudden increases in supply costs – without disrupting your operations.
8. Leverage working capital solutions
Even with the best planning, there will be times when expenses and revenue fall out of sync. Having access to a flexible working capital facility gives you the breathing room to manage short-term cash flow gaps without derailing operations or growth plans.
How working capital solutions can help franchisees
When expenses and income don’t align, flexible working capital solutions can provide fast access to funds for supplier invoices, payroll, tax liabilities, equipment repairs, or other operational needs – helping franchisees avoid disruptions and keep the business running smoothly.
Beyond bridging short-term cash gaps, these solutions can enable franchisees to take advantage of supplier discounts for early payment, bring on extra staff during busy periods, or fund expansion.
Having funding available when it’s needed allows franchise owners to focus on building their business, responding to market opportunities, and maintaining high service standards – without being held back by short-term financial pressures.
Keep your franchise running smoothly
Octet’s working capital solutions, such as a line of credit with flexible repayment terms, can help franchise businesses and their franchisees with cash flow management, ensuring they are well-positioned to seize growth opportunities.
If you manage a franchise network, or you’re a franchise owner, and want to learn more about how we can help, get in touch with the team today.
Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.
