A Unique Type of Broker
Franchise brokers are not employees of franchising organizations. You can compare these types of brokers with mortgage brokers, insurance brokers, stock brokers etc. They are middlepeople who offer sales and services to the product line they represent.
Using a broker will not cost you anything, but brokers earn a commission only when you buy a franchise from one of their clients. When you sign your franchise agreement, the broker will typically earn 40% to 50% of the franchise fee you pay. In some cases, brokers may earn a percentage of your payments if you purchase additional franchises later, and they may even earn a percentage of the continuing royalty payments you make.
How Franchise Brokers Get Paid
Franchise brokers only earn money on franchises offered by the clients they represent. So while there may be thousands of franchises available and hundreds that would be a good fit for you, the broker you are working with will probably show you only a very small percentage of available franchises. Here is where you may want to consider hiring a franchise consultant.
Franchise brokers may not offer you the pros and cons of his or her offerings in how these systems will fit your lifestyle needs or particular interests. Therefore, watch for the over zealous broker who comes across sounding like a used car salesman of yesteryear.
Franchise Brokers on the Web
While use of franchise brokers is increasing, only a small percentage of franchisors use broker networks, and even the largest broker networks only represent a relatively small number of franchise opportunities. Brokers can provide you with important information on franchising and the opportunities available – but only about the franchisors they represent.
Virtually all franchisors advertise their franchises on lead-generation websites (franchise directories) where many different opportunities are available. Some of these sites provide information about franchising in general and also charge the franchisors a listing fee. Referral sites provide a wealth of information on franchising and let you explore specific franchisors at your leisure, without having to deal with any franchise salespeople until you are ready. Not all of these franchise information sites are referral sites; many are actually operated by franchise broker networks.
Explore Competitive Opportunities
Include brokers in your network of information on franchise opportunities, but always keep in mind that they work for the franchisor and only get paid if you buy a franchise from one of their clients. If they tell you that a hair-care franchise is perfect for you, they may be right. In addition to the hair-care chain they introduce you to, get information on all of the other hair care franchises available. Their client may be the best fit for you, but you need to make that determination based upon your own research.
