It's your money, so ask the hard questions
But much can go wrong, not least disagreements with the franchisor about problems ranging from unexpectedly low earnings to lack of training. Hence the recent review of the franchising code of conduct, which recommends the government strengthen the obligation of all parties to act in good faith.
So, before jumping into a franchise, consider some vital selection process do's and don'ts.
Engage your other half
Your life partner should be part of your franchise quest because,whether or not they work in the franchise, they are coming for the ride. So dial them in, says franchise consultant Troy Hazard. One successful franchise couple is Neil and Sharon Menzies, who run two San Churro cafe businesses together. The couple did extensive collaborative research, frequenting a local branch, talking to the owner, calling as many local franchisees as possible and observing customers.
Know the whole network
Ensure you meet all the key players involved in any franchise you assess, says business coach Tracey Leak. Get to know the franchisor and whoever will offer support when you join the group, and check if you like that person. Also meet the marketing manager and everyone else in the franchisor's head-office team, because they will be key to your business. See what they contribute, she says. Meet as many franchisees as you can. A list should be included as part of the disclosure information franchisors must provide by law.
Ask anything
An inquisitive approach is vital, says Leak, who warns that in your excitement you may neglect to ask probing questions. "No question about the franchise is off limits," she says. For instance, ask what training you get and what you should earn.
Don't get suckered
by glamour
Just because a franchise is sexy or cool it is not necessarily a winner, warns Leak. "Some of the best franchise businesses I've seen from the inside are the good, honest businesses that have stood the test of time and wouldn't be considered sexy," she says. The less glamorous ones had the best systems and support so don't make judgments on wow factor. She highlights the bookkeeping business First Class Accounts and the cleaning business Gutter-Vac as great everyday franchises that can yield "a very comfortable living".
Don't tolerate waffle
Beware of franchisors with a fuzzy strategic vision, Hazard says. He lists some areas of inquiry to neglect at your peril. You must find out if the franchisor has a business plan covering one year, two years, five years or 10. Also establish if the franchisor has an exit plan. Investigate how their exit will affect you, as you may be left in the lurch. A 2006 report by University of New South Wales academic Jenny Buchan found 93 per cent of franchisees involved in a franchisor collapse sustained sharp financial losses and were forced to sack staff.
Don't forget you might want to sell up one day
Some franchisors have been known to make the exit process so complex that you have no choice but to sell the business back at a huge loss, warns business coach Melanie Miller. The franchisor then sells the business you toiled to build to whomever they like at a price that suits them, Miller says. Two of the biggest franchisors had Australian Competition and Consumer Commission cases launched against them for just this reason, she says. So, as part of due diligence, enlist some advisers - your accountant, solicitor and perhaps an external consultant - for another objective, professional and qualified opinion.
As often applies in business, the secret of picking a franchise is rigorous research. Never hesitate to ask awkward questions. Scrutinise the small print in contracts for snags. Also, experts say, look for solid signs of innovation and refuse to be "sold". The franchising world has its share of slick sales reps who will talk you in circles if you let them.
Frequently Asked Questions about this Article…
Buying a franchise gives you a ready‑made business model, access to the franchisor’s professional team and the experience of other franchisees—reducing some of the uncertainty of launching a start‑up while still letting you run your own business.
Include your life partner in the decision (they’re part of the ride whether they work in the business or not), and enlist professional advisers such as your accountant, solicitor and possibly an external consultant for objective, qualified advice.
Do rigorous research: meet as many franchisees as possible (the franchisor must provide a list in disclosure documents), meet the franchisor’s head‑office and support staff, ask probing questions about training and earnings, scrutinise contracts and small print, and check the franchisor’s strategic plans and exit arrangements.
Ask about the training you’ll receive, realistic earning expectations, who will provide ongoing support (marketing and operations staff), and whether the franchisor has one‑, two‑, five‑ and ten‑year business plans and a clear exit strategy.
A franchisor’s exit or collapse can leave franchisees with heavy financial losses and forced staff redundancies; research cited in the article found most franchisees affected by a franchisor collapse suffered sharp losses—so check exit terms and how an exit would affect your business.
Not necessarily—glamour doesn’t equal long‑term success. Less glamorous franchises with strong systems and support, such as bookkeeping or cleaning businesses, can often provide stable, comfortable incomes.
Beware of waffle: if the franchisor can’t describe clear business plans, growth strategies or exit arrangements, or if they avoid direct answers, that’s a red flag. Request concrete plans for 1, 2, 5 and 10 years and evidence of innovation and support.
Don’t be sold on hype—ask awkward, specific questions, scrutinise the small print, demand proof of support and performance from existing franchisees, and refuse to sign until you’re comfortable with independent advice and clear answers.
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