(FS4) The Franchise Broker and What They Do for Business Owners
Franchise brokers can be essential to franchising as they are individuals or companies that will offer to help find the right franchise for you. Some will even assist you as you create a business profile that reflects who you are, your background, interests, lifestyle, and expectations. They will also assist in describing your financial qualifications. This profile can help speed up the process of finding the right franchisor that fits you. Some brokers will offer to be liaison for you and the franchisors you are considering. This will aid in asking questions and getting the answers you need in order to make informed decisions. Note that not all brokers do this and just as many will simply make referrals and collect the fee if you become a franchisee through their service.
Watch out for smooth language typically used for legal purposes. Many franchise brokers don’t call themselves sales brokers, but will call themselves consultants. Also be aware that using a broker may increase the pressure to purchase a franchise before you are ready. If you decide to get into business with a broker, you should have a strong sense of self and the ability to tell people ‘no’ if you are not ready. This is especially important to know because most brokers receive 40-50% of the initial fee you pay the franchisor if you sign on with them and sometimes they receive a portion of the royalty fees that you will continue to pay.
That’s not to say that all brokers are bad. Good brokers should be able to provide you with information on the franchises as well as the best way to save money during startup. It’s just important keep your eyes out for the broker looking with their interest in mind or yours and how to identify either.
Does the Franchise Pass the Time Test?
Another thing that you should pay attention to when picking a franchise is how well that industry has done in the recent market and in the long term market. You will not find franchisors who will be upfront with you about these numbers so you will have to do information search on your own about the stock and growing value in the market for the specific industry, look at the documented growth of the company that may be listed online, though this may not be available for all businesses.
By looking into the past of an industry can tell you a lot about where it’s headed. You can also look into the past of the specific companies to graph how they’ve grown or if they have shrunk. With franchising being the investment it is, it’s important that you feel solid in your decision by knowing the company, the industry, and the projected future of both before you invest anything other than time in them.