The site refit negotiation can be one of the most reliably tricky conversations in franchising. A chance discussion at an industry forum revealed why, highlighting a gap in the market with limited options to fill it.
It all started with a concern that’s familiar to franchisors. Kevin Lacey, general manager, network development, at San Churro, the national dessert franchise, was talking with David Edwards, head of strategic growth at Banjo Loans, about observations on the recurring dynamics of the refit standoff.
“Kevin spoke about a typical scenario where a cost would be put forward. The franchisee would inevitably push back. They’d land somewhere in the middle, and neither party was happy,” recalls Edwards.
“Kevin told me ‘We always strive to keep our network fresh and inviting for customers. Our experience shows that post a refit, stores actually experience elevated sales, so the economics stack up, but the upfront cost is always the issue’,” he says.
What San Churro described wasn’t just isolated to their model; it was a structural problem across the Australian franchise sector and, remarkably, lenders had not looked to address it head-on.
This got Edwards and the Banjo team thinking about how they could create a solution customised for the unique financial needs of franchise refits.
A known obligation, and a missing solution
The ACCC’s own guidance on the 2025 Franchising Code of Conduct explicitly classifies major store refurbishments, fit-outs, rebranding and equipment upgrades as significant capital expenditure, which must be disclosed to prospective franchisees and discussed before any agreement is signed.
The Code even cites a refurbishment cost of $100,000 every five years as a typical example of what franchisees can expect.
Yet, despite refits and rebranding being a known and recurring contractual obligation across virtually every franchise system in the country, a purpose-built financing solution has largely not existed until Banjo’s fortuitous discussion with San Churro.
“Franchisees have traditionally had to find their own way through it with cash reserves, highly-secured bank finance, family and friends, or a reduced scope,” Edwards says. “That last option is the most common, and it costs franchisors the standard of refresh they actually need.”
The consequence plays out in the negotiation. A franchisor who knows a full refit would generate a significant sales uplift still has to negotiate against whatever the franchisee can spend from cash.
A $200,000 refit becomes $100,000, and there is less likelihood that the uplift is actually realised.
Changing what’s on the table
A franchisee who has operated a profitable business for five years has potentially drawn down those profits along the way until the refit obligation arrives. At that point, the franchisor’s ask and the franchisee’s available cash are rarely aligned.
Spreading the cost over the next franchise agreement term, rather than requiring it upfront, is a logical response. It removes the cash constraint from the negotiation, and with it the pressure to compromise on scope.
Financing of this kind also works best when it doesn’t require property as security, since many franchisees either lack property assets or are reluctant to put them on the line for a store upgrade.
“When you spread the cost over five years and the directors don’t have to put up real property security, the conversation about scope changes entirely,” Edwards says. “You’re much more likely to get the full refresh and the full sales uplift when you’re not negotiating against a cash constraint.”
This also reframes the way a franchisor can talk about refits with their franchisees.
Rather than arriving at renewal with a refit requirement and no path forward for their franchisee, they can arrive with both: the ask and the means to achieve it.
Lacey says “Being able to break down the refit cost to a more manageable weekly/fortnightly/monthly repayment really helps to pave the way to solid investment in the franchisee’s business.
“Similar to the way hire-purchase finance has worked in big box retail for many years, taking the larger TV, or better quality fridge for an extra few dollars a week – it’s the same principles! And it really sets us up to drive the whole network into a quality state that is aligned with our brand objectives,” he says.
Whose problem is it, really?
For franchisees, keeping cash reserves intact and spreading a large capital obligation over time makes a material difference.
But the dynamic arguably matters more to franchisors who bear the real cost every time a franchisee can’t fund a full refresh: a compromised standard across their whole network.
Furthermore, the long-term absence of such a tailored finance solution points to a broader truth: the Australian franchise sector’s financial dynamics are distinct enough from general small business lending that purpose-built solutions rarely exist.
When lenders like Banjo listen, big shifts are possible.
Find out how Banjo helps franchisors turn the refit conversation around with their dedicated solution.
