There is a right way and a wrong way to think about investing in a franchise. I have worked as a consultant to a number of franchises, and overall have not been impressed with the supposed "system" that franchise companies promise to their franchisees. Other than a very few, very well known names, the franchise world -- in my opinion -- has been saturated with companies who try to franchise before they have developed a viable marketing and operating system.

Equally troubling, because it is so hard to sell franchises in today's busy market, your initial investment goes largely to pay marketing expenses to the franchise (instead of to support for your business), including as much as a 40% commission to franchise consulting firms that pitch a franchise to potential buyers.

Here are three rules to consider before you buy a franchise:

1. Never buy a single franchise unit. If you do, you are essentially buying a job, while hoping and praying that your franchise company is viable. Why would you invest your life's savings plus ongoing royalties in the hopes that the franchise brand will bring you business. Too many franchises are selling a house of cards, and they can even hide numbers in their franchise offering to make their business look less risky than it is. Plus, your upside is forever limited to your geographic territory and basically zero appreciation on your investment when you sell.

2. If you do buy into a franchise, raise enough capital to buy a master license or multiple units. That way, you can open multiple units or sell territories within your region. But again, only do this if you are 100% sure that franchisees can make money. Otherwise, you are buying into what is essentially a ponzi scheme; eventually your franchisees will fold, your reputation will suffer, and you will be left holding a worthless territory.

3. Rather than buy a franchise, create a franchiseable business of your own. In my opinion, it is easier to do this than to deal with a franchise headquarters and all of their legal requirements and restrictions. Once you have a franchiseable business, you can do all sorts of things with it: hire competent leadership to grow your business while you set direction (and enjoy the profits); enter into joint ventures with others who can invest in and grow your business; sell the business for a premium price; and create your own franchise. With a franchiseable business, you have unlimited choices, including the option of creating your own franchise organization. However, if you do choose the franchising route, make sure that you really do have a system that can help individual franchisees make money. Otherwise, you are hawking a house of cards that will damage your reputation, pehaps lead to a class action lawsuit against you, and potentially cost you everything you worked so hard to create.

The Profit Growth Club is designed to teach you how to create a business that runs by itself, so that you have unlimited options and don't need to bet on a franchise company for your success. To learn more, click here.