Prospective franchise owners who are on the market to purchase a franchise opportunity have several options to choose from.
They can either explore franchise opportunities available on the web on their own or they can consult with a franchise broker to help them navigate the complex field of franchising.
If you find yourself in such a situation, you may be wondering if and why you should hire a franchise consultant. This is the main question we will address in this article. Keep reading to find out more.
In this article:
The role of a broker in buying a franchise business
The very first question you should ask yourself is do I need a broker to buy a business, especially in franchising. The answer to this question will depend on your individual circumstances.
For example, when it comes to the question of what is the role of a franchise broker, you can consider it akin to a real estate agent.
They bring together a buyer and seller in the property market and help each of the parties find the best deal in the circumstances.
Similarly, a franchise broker, consultant, or coach is an individual who brokers deals between franchisors and prospective franchise buyers.
They do this by presenting to the prospective buyer a series of franchise opportunities that align with their personal and professional objectives, their state of finances, the time frame within which they’d like to get started, and the industry in which they would prefer to operate.
As such, a franchise broker or consultant is a third-party who typically works with franchisors to source prospective franchise buyers for the franchisor that they vet and consult with to determine a good fit.
Read more: Understanding the Role of a Franchise Consultant vs. Franchise Broker
How does the broker select franchises?
A franchise broker often has several franchisors that they work with.
These consultants usually sign an agreement with a franchisor to bring them quality leads in exchange for a fee. This fee can be in the form of a percentage commission or as a flat fee.
The more franchisors in the broker’s portfolio, the more leeway that they have in terms of offering greater and more attractive opportunities to the prospective franchisees.
Pros and cons of buying a franchise through a broker
If you would like to pick a franchise broker but you are still uncertain about whether this is the ideal route for you to take, it’s important to consider the pros and cons of making this move.
Here’s a brief breakdown of what you can expect in terms of considering both sides of the coin.
Pros
Franchise brokers or consultants are experienced and skilled individuals who can help you with aspects related to:
- Competitive research
- Strategic planning
- Financial modeling
- Organizational analysis and planning
- Navigating operations manuals
- Taking you through training curricula and online learning systems
Cons
However, there are certain downsides to using a franchise broker, too. Here are a few considerations to bear in mind:
- They may have a limited franchisor portfolio
- You may be guided to opportunities that don’t suit you
- It’s possible that they may exaggerate regarding financial projections
- It’s possible that they may not be as experienced as you’d like them to be
- They could hide negatives in order to get you to sign so that they earn their commission
Therefore, the question of how to pick a franchise broker should weigh up both the pros and cons of doing so and ensuring thorough research into the broker before getting started so that you can make the right decision that meets your needs.
How to find a franchise broker
There are numerous organizations and companies that you can search for online to help you with how to find a franchise broker.
You can also consult business directories and franchise bodies to see which brokers they work with or which ones they recommend. A quick online search should initiate the process.
However, it’s up to you to do your due diligence and ensure you’re as thoroughly prepared to work with a franchise broker as you would be prepared for any other major decision in your life.
How much do franchise consultants charge?
Franchise consultants can charge either on a commission basis or on a fixed fee basis.
The commission model is the more popular one in the industry.
In these cases, a franchise broker can charge approximately 40% to 50% of the initial franchise fee.
This works out to an average of $20,000 per franchise sale or deal entered into.
Conclusion
The decision to hire a franchise consultant demands careful consideration of its pros and cons. It involves evaluating their expertise against your goals, financial situation, and professional aspirations.
Pros include expert guidance and access to a wider network, while cons may involve costs and potentially misaligned advice.
Rigorous due diligence is crucial in assessing a consultant’s track record and compatibility with your objectives.
This choice should fit into your long-term business strategy, requiring introspection and possibly advice from trusted mentors.
Ultimately, the right consultant can significantly impact your franchise success, but the decision rests on informed judgment.
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