For the past ten years, franchise brokers were used by almost half of all active franchisors and roughly 10 percent of all franchise sales. So what makes franchise brokers useful today?
When it comes to franchising, the ‘right’ knowledge is the essential ingredient in getting the ‘right’ experience. And for you to get the right amount of knowledge, you need the right person to help you. This is why you need a franchise broker. Brokers start their job by studying the franchise candidate and then find the right franchise to match the client’s background and personality according to their rich knowledge of the franchise industry.
Franchise brokers as “business coaches”
Franchise brokers are known to be franchise consultants, advisors or coaches. But for Linda Menter, vice president of FranChoice, a franchise consultancy, seeking a broker’s help is a way to lessen the risk and save valuable time throughout the process.
For Menter, the broker’s role is to screen thousands of franchise opportunities and take all the great choices to get the perfect one for the client. One crucial thing about being a broker is to guide the potential franchisees to prevent them from making mistakes especially when they are falling for a particular franchise concept they are not knowledgeable of.
Lastly, Menter added that good franchise brokers guide potential franchisees to know more about their entrepreneurial skills, the franchise business and ownership and the entire process of franchising.
How do brokers choose the best match for you?
Risks are always part of any investments and buying a franchise is no exception. Seeking help from franchise broker doesn’t get rid of all possible risks but it can help a lot to lessen them. Choosing a franchise broker is crucial when you start looking at franchise opportunities. Some brokers are paid through commission on the sale by the franchisor that they represent. Someone needs to evaluate the experience and reputation of a franchise broker as well their references.
So, what basically are the things that franchise brokers do? Here are the following:
- They spend time in suggesting a certain type of franchise.
- They want to know your goals, plans and motivations.
- They want you to understand the advantages and disadvantages of owning a franchise
- They want to know your commitment, your management skills and try to match your characteristics to the nature of the franchise.
Who pays for broker’s services?
Franchisors do the payment. Franchisors consider hiring brokers as part of their marketing expenses to make sure they are getting qualified candidates. One of the important things that you should know in choosing a broker is how the broker gets paid for his or her service. There are two common ways of paying brokers. Some brokers are paid based on a flat rate which means that the same payment will be paid to the broker regardless of the sale price of the franchise. While other brokers earn a commission according to the franchise cost which means that brokers can get a higher commission for a higher franchise cost.
While the latter can motivate brokers to make clients but an expensive franchise, it’s not a good idea for both franchisee and franchisor. Brokers who bring potential franchisees who are not qualified or matched in a certain type of franchise will cause more harm than good. Thus, looking for credible brokers with good reputation and established record is the best way to guarantee qualified candidates.
What are the pros and cons of working with a broker?
Franchise brokers are often hired to make the process shorter and save time. In looking for a franchise, you will be stuck with a tremendous number of information and data and this will surely consume much of your time. A broker makes things easier for you by narrowing down the options and gives you a specific set of franchise opportunities to choose from.
A good broker can also save you money especially when you are falling into a franchise concept which is not the right choice for you. Many people are still new to franchising. That’s why it’s important to seek a broker’s assistance for guidance. In choosing a proven and trusted broker, the success rate should be given consideration. Franchisors should speak with their brokers and assess how successful the franchise candidates are.
On the other hand, be aware of brokers who are just after the commission. There no strict regulations for people who want to be a broker, so you should check their credentials carefully and their track record. Though you have a trusted broker, you should also double check the information that he or she supplies. Ask you accountants, attorneys and trusted family and friends to review important documents that are used throughout the process.
Franchise brokers can be so helpful in considering available options and in making your decisions. Nonetheless, as a potential franchisee, you need to do your part and set a clear vision of your plans and goals in your business venture.