We sat down with Charista Baye from Thoughtful Franchise Brokers to get the low-down about the good and bad about working with a franchise broker. In this interview, we discuss what franchise brokers do, how they can hep, and what to look out for. You can reach out directly to Charista at [email protected] with any franchising questions. Take our 7-minute franchise quiz to get matched with an opportunity that’s right for you.
- Should you work with a franchise broker or directly with franchisor?
- What are the benefits of working with a franchise broker?
- Reasons not to work with a franchise broker.
- Do franchise brokers need a license?
- What’s the difference between franchise broker and consultant?
Should you work with a franchise broker or directly with a franchisor?
In my opinion, you should always use a franchise broker rather than working directly with a franchise. There is no downside to using a franchise broker as it does not change the franchise fee you pay or any other fees you will have to pay. If you have a specific franchise you are interested in, the best approach would be to tell your broker about it so they can be the ones to make the connection to the franchise. If you go directly to the franchise, your broker will not be able to be paid a commission when you sign.
It’s very similar to the real estate industry on the buying side. When you buy a house there’s not really any reason not to use a realtor to help with that process. They can show you houses you can’t find on your own, help with negotiations and ultimately help you find the best fit without you paying a penny. It’s a similar concept – though there could be slight differences.
Let’s break down the benefits of using a franchise broker. We’ll also look at the reasons why someone could think there is a downside to using a broker and explain why most of those are untrue.
Benefits of Using a Franchise Broker
1. It saves you time.
Have you ever tried Googling information about the best franchise to buy? You could spend months doing research and still not have an answer to that question. Yes, there are countless YouTube videos out there and lots of resources to be able to learn about franchises, but it takes countless hours to find this information. Even once you’ve found some good content, you’re still left with lots of questions. Are these facts true, are they just selling me, am I the type of person they are looking for, do I qualify financially, is it open in my territory?
As brokers, we have spent years analyzing this data. We know the answers to some of these questions about particular brands because we have already had candidates go through the buying process with them. We know when something sounds too good to be true, and we also know when the whole truth is maybe not being portrayed. As franchise brokers we have access to the Franchise Disclosure Document (FDD for short) of any franchise. We can find out exactly what the initial investment will be along with the financial performance of the existing franchisees. Want to know what the average gross revenues are for the current franchises? We can tell you that information.
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Our job is to make the best match possible. Not only are we matching you based on tangible things like territory availability and how much money you have but we’re also looking at what motivates you, what your long term goals are, what your work style is, and what you want your day to day to look like. Our process takes a couple weeks until we’re presenting franchises to you, but we are saving you so much time as the amount of options out there are endless. Many of our candidates had previously tried to do their own research but became too overwhelmed with the information that is out there.
2. We have resources to refer you to.
Not sure what to do about funding? No problem. We have multiple funding partners we can send you to who will help you figure out the best route to take. There are multiple ways to fund a franchise and it’s best to work with a funding expert who has helped others buy franchises. Our partners offer education calls at no cost.
Want to negotiate some terms of your franchise agreement? We also have franchise attorneys that we can send you to. You will need to pay for this service, but it’s definitely something we highly consider everyone to do if you’re considering signing a franchise agreement.
3. We help throughout the validation process.
Once we introduce you to the franchise, we don’t part ways. We work with you and give you advice all throughout the process. We have a few documents that we will send you as you get to different parts of the process, such as questions to ask the franchisor, questions to ask the franchisees and how to read an FDD. We will even review the FDD with you and point out anything we see where there may need to be more clarification. We are not attorneys and still recommend you use a franchise attorney, but we have read hundreds of FDDs so we know what to look for when reading one.
Every week we have a call to discuss the different calls you may have had with franchisors and franchisees that week. We help to be a sounding board for you and bring up some things that maybe you haven’t considered yet. We are here to be an unbiased third party helping you get clarity to decide if buying a franchise is right for you, and if so, which one fits most of the boxes.
4. It’s free!
Best of all, none of this costs anything to you! You get hours of our time for no cost. This is why we tend to be pretty selective with who we work with. If we get the sense that you’re not serious about pursuing business ownership or it may not be the right time for you, we’ll put things on pause until it’s a better time.
We get paid a one-time commission by the franchisor when you sign. This is money that is set aside in their marketing budget and does not change the price you pay.
Why would someone NOT want to work with a franchise broker?
Some people are under the impression that franchise brokers only show franchises that have the best commission. I’m sure there are some brokers that do put more weight into that. But we at Thoughtful Franchise Brokers are here to make the best fit possible. As a general rule of thumb, the range of commissions is pretty similar based on the industry. There are times though that we have shown franchises where the commissions are 75% less than another franchise we’re also presenting.
If we only made recommendations based on the highest commissions – we wouldn’t be closing very many deals. We take a very customized approach when we are trying to decide what brands are the best fit for each individual candidate. We have never presented exactly the same options to one person than we have to another. Do we have favorites? Sure! But that doesn’t determine if we will show that brand to our candidate or not. We’re interested in presenting franchises that check as many of the boxes you’re looking for as possible. Our ultimate goal is that we place you into a franchise that you thrive in.
Another concern a person may have is if their broker is well educated on the options available. If they are not with a network, then it’s very unlikely that their inventory will be very large. That broker may only have 20-30 brands that they are allowed to present. If the broker is with a network, then they will have hundreds, if not thousands of brands they can present.
Questions to ask your broker: Are you with a broker network? How many brands do you have in your inventory? What criteria are you using to match me to the right franchise? How many people have you placed in a franchise? How long have you been doing this? Why should I choose you over another broker? If you get a bad vibe after asking any of those questions then maybe it’s time to look for another franchise broker. If they can comfortably answer your questions, then you’re likely in good hands. It’s also a personality fit too. There are a lot of great franchise brokers out there so if you just don’t click with someone, feel free to shop around. Just don’t use two brokers at the same time. You need to pick only one.
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Lastly, if you still want to do your own research on franchises, by all means go for it! Just let your broker do that actual introduction to any that you’re interested in and don’t fill out your contact information on any franchise website. As I mentioned in the beginning, your broker won’t be able to get paid on that deal if you end up buying that franchise unless they were the ones to make that introduction.
Most brokers really do have your best interest in mind. If you get a bad vibe from your broker it’s really easy to part ways with them. If you feel something is off, it probably is. Trust your instincts and you’ll be fine.
Do you need to be licensed to be a franchise broker?
Technically, no. While franchises are highly regulated by the FTC, interestingly enough – brokers do not need any license. That is why using a franchise broker that is part of a network is highly recommended. We are part of the Franchise Broker Association and they have an extensive training program that all brokers are required to complete to be a part of their network.
The training is over 2 weeks of online and in person training. It is very comprehensive and allows for their brokers to be highly educated about the franchise buying process. I would strongly advise against using an independent broker who has no affiliation with a franchise network. Some networks are better than others and FBA is one of the most highly respected networks.
What’s the difference between a franchise broker and franchise consultant?
Some people use the word broker and consultant interchangeably but they can be two different roles. It’s best to ask the person what their job is to be clear, as it really depends on who you are speaking with and how they are defining their role. By definition a consultant is someone who offers advice and a broker is someone who connects a buyer and a seller. I would argue that as a broker, I also offer advice, but you may have someone who is a consultant and does not help with that matchmaking process.
There are some people who call themselves franchise consultants who help current franchise owners and coach them on how to be more efficient or more profitable. This could be a person who has owned franchises in the past and they want to help current owners to be more successful. This would be a different person than a franchise broker, as they are helping someone at a completely different stage of the process. That is why it’s best to ask the person you’re speaking with to get clarity on what services they offer – regardless of what they call themselves.
Bottom line – if you’re considering buying a franchise at all, speak with a franchise broker. They can help you determine if it would be a good fit for you, explain timelines, how the process works, and ultimately present some options to you. There’s no obligation to buy and you pay anything extra as a prospective franchisee. You literally have nothing to lose but in the worst case scenario a few hours of your time to get some questions answered.