Is there an industry average of what percentage of revenue a franchisor spends on research and development?

Shelley Nadler writes:

There’s not an industry average for spending on research and development in franchising.

Generally, companies in health care and technology sectors spend more on research and development than retail and consumer businesses.

All franchisors should have research and development facilities in relation to their products, services or system and the market image projected.

Franchisees will expect franchisors to innovate to ensure the network remains competitive and takes advantage of the latest technological developments. This is part of what franchisees buy into, rather than starting a business on their own.

Franchisors should be experimenting with new product lines and/or the introduction of new or improved services. These products and services must be compatible with the existing business and should be thoroughly market tested before they’re adopted.

All changes, whether to system, products or services, should be as carefully evaluated as the original operation that was the basis upon which the franchise was started, so that the franchisor can demonstrate to franchisees the likely benefit that should result from their introduction.

Technology related research and development may qualify for research and development tax relief if certain criteria are met. Franchisors should discuss this with their accountant or financial adviser.

Shelley Nadler is a legal director in Bird & Bird’s international franchising team and has many years’ experience of advising on all aspects of franchising.