Buying a franchise is a big investment in your future, so you want to get it right and not become a franchise-fail statistic.

Buying a franchise is often regarded as a shortcut into business – taking steps into business ownership without standing alone.

You are buying into a business with a brand name, an existing system of processes, marketing campaigns and training programs. The franchisor is providing franchisees with the means to do business.

So what are your expectations? It’s easy to make certain assumptions when investing in a franchise but it will help to understand just what the franchisor expects from you.

Perhaps the most common mistake is to assume that the franchisor will be responsible for your business.

Buying a franchise requires solid commitment, application, hard work and an appreciation that the business is yours to turn into a success or a failure.

Of course there are elements that need to be aligned to ensure the best chance of succeeding, and it’s worth taking time to check these out.

Let’s start with the franchise system and the franchisor:

1. Is your chosen franchise a proven system?

We all love new ideas, and it’s exciting to be involved in a brand new project that will take the world by storm. Of course every household brand name started out as a small business but when it is your money being invested and your future at risk, you need to be sure that this great new concept will work in different locations, in tough economic times, in three years’ time.

If you’re a big risk taker, then dipping your toes into the start-up pool can be terrific; but if you’re cautious by nature, and you need your funds to bring you a solid return on investment, then picking an established brand probably makes more sense.

2. Is your franchisor working for your future?

Yes, we’ve just said that your business is your responsibility, but one reason to buy into a franchise system is to gain competitive advantages offered by a go-ahead franchisor who offers vision, direction and support for the whole franchise network.

The franchisor also takes on the research and development role, looking ahead to new markets, new product or service offers, regulation changes, industry trends.

3. Is your franchisor cashed-up?

Consider how your franchisor makes money: is it from selling franchises, from selling products to franchisees or from royalty fees?

If the network is growing fast, does the franchisor have the finances and resources to support this speedy growth?

Signs that franchisors might be struggling financially can include reduced communication with franchisees, phone calls or emails not returned, staff redundancies, and a decline in advertising and marketing campaigns.

4. Are franchisees successful?

Every franchise model will have some franchisees that have not succeeded. What’s important to discover is what the failure rate is across the network, and what has brought about these failures.

The number of franchisees who renew their agreements is one sign to look for; another is to find out how many of the franchise outlets up for sale are distress sales.

Speak to existing and former franchisees to delve deeper into this.

Are franchisees happy with their return on investment?  One of the best signs of a good franchise is a network of profitable franchisees.

Would they buy into this business again? Not all franchise systems embrace multi-unit franchising, but if your chosen franchise does, it’s a good sign to see lots of franchisees investing in their second and third outlets.

5. What are the negatives about the business?

You can discover from franchisees what they find difficult in their relationships with the franchisor and head office team. You can also find out if disputes are common, and how they are handled.

Go online and find out what is being said about the franchise chain – then you can go back to the franchisor and question them about any concerns you might have.

Now we’ll turn to you as a franchisee:

6. Are you a conformist?

New ideas are what take business to the next level, but franchise systems are built on compliance and conformity.

You might want to ‘do your own thing’ with your business, but you need to ensure you are following the rules and the processes that have made the franchise a success for existing franchisees.

You'll need to be a team player because other franchisees will be relying on you to follow the rules.

Being your own boss in a franchise really means being responsible for your own business, not running the business exactly the way you want.

7. Are you committed to the franchise?

When you sign up to a franchise agreement it is most likely you will be signing a contract for a three or five year term. That means you need to love the business that you’ll be committing to, particularly if it’s a hands-on operation that demands your presence on-site for most of the time you’re trading.

See if you can find a franchisee with whom you could spend some time in the business, getting to understand the day-to-day reality of operating the franchise before you invest your money.

8. Is your support network supportive?

Will your family and friends be behind you every step of the way? Buying into a business is a challenge, and battling alone without support from those closest to you makes it all harder.

Ensure your immediate family in particular understands what hours and commitments you need to undertake to make this business work.

Go into your franchise clear about what you want to achieve and how this franchise investment can deliver your goals.

9. Can you afford to fail?

Are you fit and healthy? Will you be able to take on the demands of the role? Can you and your family survive failure?

It's important not to take on a business initiative that, if it fails, would see marriage break-ups or put your financial situation in serious peril.

If so, consider whether going into business perhaps isn't the right step for you right now.

10. Have you got the finances?

Doing a proper budget is essential before you buy a franchise. On top of the initial franchise fee will be legal, accounting and any business registration or licensing costs; there may be extra costs for equipment that you need to consider. Always check with your franchisor what additional costs there will be.

It's imperative to have sufficient working capital to ensure your business doesn't collapse from cashflow problems in the first few months while you are establish yourself in the market.

Calculate extras like tax and superannuation into the budget too.

Do your research

The best way to be confident in your franchise choice is to be thorough in researching the opportunity, location, costs, the franchisor, the market and other franchisees.

It’s essential to do your own research or due diligence, so that you are not relying solely on information provided by the franchisor.

As part of this process, seeking legal and accounting advice from experts experienced in the franchising sector is a wise move.

Confidence is invaluable in any business but over-confidence can stop you from seeing the danger signs. 

Measure up your concerns from any of the responses to the above questions and be as objective as you can about what happens next.