The key to answering this question is to do your own homework on exactly what to expect and base your decisions on that information, not the glossy projected version.

When you have your expectations based on an unreal vision, then there are bound to be complications. Once you know just what to expect in your prospective franchise system, then you are less likely to be disappointed by your decision or your franchisor.

This homework, often more formally referred to as ‘due diligence’, needs to focus not only on the type of franchise you will buy, but also what you will then receive from that franchise system as a new franchisee – business support, resources, marketing. 

Extensive research and knowledge will help set solid foundations for success for any franchisee, and will ensure you are as fully prepared as you can possibly be and know exactly what you are getting into.

 Professor Lorelle Frazer, Dean and Head, School of Business and Creative Industries at the Sunshine Coast University, has undertaken extensive research into the area of due diligence in franchising, in conjunction with Associate Professor Jenny Buchan of the University of New South Wales.

Research conducted by Professor Frazer, has revealed that potential franchisees are often complacent about conducting proper due diligence. Many do not devote enough time or are unwilling to pay for expert advice. Their emotional attachment to the brand often overrides objective information. To undertake effective due diligence, a prospective franchisee needs to keep an open mind and to seek out and dispassionately question all information.

Below is a description of many a naïve first-time investor into the franchise sector:

“We love the brand and we are willing to invest our life savings in it. After all, this is a well-known franchise with hundreds of stores so it must be good. The franchisor says it is offering a proven business. It has given us a disclosure document containing many pages of information and we have tried to read the franchise agreement. There is also a lease. To be honest, we can’t really understand all the legal jargon. We just want to get started on running the business. Besides, won’t the Franchising Code of Conduct protect us?”

As Professor Frazer explains it, you wouldn’t buy a car before taking it for a test drive, having it checked by a mechanic and making sure there was no money owing on it, so why wouldn’t you apply the same rigour to investing your hard-earned savings and potentially tying yourself into a business for at least five years.

Buying a franchise is a big step. When you are considering such an expensive commitment, it is a sound first step to visit a lawyer and an accountant who really understand franchising, from the franchisee’s perspective, for their advice.

Prospective franchisees are encouraged to do as much homework as they can, including online by googling the brand and the industry in which it operates. They should also check out the website of the franchise sector regulator, the Australian Competition and Consumer Commission, which investigates breaches of the Franchising Code of Conduct.

Franchisees can also educate themselves on the ACCC site, which has funded an online pre-entry franchise education program run by FranchiseED. FranchiseED provides independent information and education within the franchise sector, offering online courses and up to date information on key franchising topics. 

The best advice for deciding on which franchise in which to invest, is to not totally rely on one single source of information. Remember, there is always going to be another franchise opportunity so if you are not completely happy do not rush into buying.

Updated for accuracy March 2021.

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