The Compensation Strategy That Builds Sustainable Franchise Growth When team members think like owners, they make decisions that protect and grow the brand for the long haul.
By Dan Rowe Edited by Carl Stoffers
Key Takeaways
- Giving meaningful stakes to sales, marketing, and brokers fosters owner-like decision-making.
- Incentives focus on franchisee quality and long-term brand value, not just short-term unit sales.
- Aligning all stakeholders — franchisors, franchisees, and team members — creates more resilient, valuable systems.
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After two decades in franchise development, I've learned that the most successful franchise organizations aren't built on quick wins or short-term revenue spikes. They're built on perfect alignment between what we want as franchisors, what our franchisees need to thrive, and what our team members are incentivized to achieve.
Too many development executives get caught up in the numbers game — how many units can we sell this quarter; how quickly can we expand into new markets. But when you optimize for long-term success across all stakeholders, everything else follows naturally.
Aligning Team Compensation with Long-Term Success
Here's where most franchise development companies get it wrong: they treat their sales and marketing teams like short-term hired guns, paying them to hit immediate targets without caring about what happens after the ink dries. That's not just shortsighted—it's destructive.
I've restructured our entire compensation philosophy around a simple principle: if our team members' biggest payday comes from the long-term success of the brands they're building, they'll make decisions that prioritize long-term success.
We give equity in the franchise brands to our sales and marketing representatives working on those brands—not token amounts, but meaningful stakes that make them think like owners. When our VP of Franchise Development for a fast-casual concept has equity in that brand, they're not just trying to sell as many franchises as possible this quarter. They're thinking about franchisee quality, market development strategy, and brand protection because their biggest financial upside is tied to the brand's long-term growth.
This approach lets me trust that my team won't cut corners or cheapen our portfolio brands' long-term success. They're not incentivized to sell a franchise to an unqualified candidate just to hit their monthly number—that candidate's potential failure would directly impact their equity value.
Equity for Contributors Who Deliver Value
We extend equity opportunities to our 1099 franchise brokers when they've proven their value. These are the brokers who bring in quality deals, understand our brand standards, and contribute to the long-term health of our systems. When a broker has helped us build a brand from 50 units to 100+ units with high-quality franchisees, they become more than transaction facilitators — they become brand ambassadors who are financially invested in quality over quantity.
We also loop marketing representatives into equity when they deserve it. Marketing is a brand-building function that directly impacts long-term value. When our marketing professionals have skin in the game, they think differently about campaign strategies, brand messaging, and market positioning.
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Pay So Well They Stay and Excel
Most companies pay what they think it takes to keep an employee. I've flipped that equation: What if you paid an employee so well that they not only stayed but excelled beyond what you thought possible?
When I hire a VP of Franchise Development, I offer high compensation, incredible benefits and meaningful equity so their goals align completely with the long-term success of the brands they're working on. A VP thinking like an owner will make better long-term decisions than one thinking like an employee.
Franchising is fundamentally about building wealth by helping others build wealth. That philosophy should extend to our employees too.
Related: How the IFA Plans to Strengthen the $800 Billion Franchise Industry in 2025
Traditional Franchise Models vs. The Alignment Model
Traditional franchise models often create incentives throughout the organization. Franchisors make money on initial fees and royalties regardless of individual unit performance. Sales teams are rewarded for volume regardless of franchisee quality. Marketing teams are measured on lead generation rather than brand building. All of these groups are optimizing for different outcomes, creating tension and suboptimal results.
The alignment model flips this dynamic. When everyone — from franchise brokers to marketing managers to VPs of Franchise Development—has equity in the brands they're building, everyone optimizes for the same outcome: long-term brand value and sustainable growth.
We still measure short-term performance metrics, but we structure compensation so that the biggest rewards come from long-term success. This creates a system where doing the right thing for the brand is also the most profitable thing for each team member.
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Why This Approach Isn't More Common
If this approach is so effective, why don't more franchise development companies use it? Many franchise development executives want to capture as much value as possible for themselves and their immediate stakeholders. They see equity as something to be hoarded rather than strategically shared. They think of team members as costs to be minimized rather than partners in value creation.
This approach might maximize short-term extraction, but it doesn't build valuable, lasting enterprises. It creates franchise systems that are fragile, team cultures that are transactional, and brands that struggle to compound value over time.
Related: How I Turned a Failing Business Into a $1 Million Powerhouse in Just 6 Months
Building the Franchise Company of the Future
The franchise industry is evolving rapidly, and development executives who cling to old models of misaligned incentives will find themselves managing declining systems. The future belongs to companies that understand how to create genuine alignment between all parties involved in building franchise brands.
This doesn't mean being soft or giving away equity carelessly. It means being strategic about how we structure relationships, measure success, and deploy resources. It means recognizing that the people who help build valuable brands should participate in the value they help create.
In my experience, companies that embrace this philosophy don't just build larger franchise systems — they build more valuable ones. They create brands that team members are proud to build, franchisees are excited to operate, and investors are eager to back.
The choice is clear: We can continue optimizing for short-term extraction and build companies that eventually hit growth ceilings, or we can optimize for aligned long-term success and build franchise development organizations that compound value for decades.
