What is a “Franchise Broker” and Why should I use one?

What is a franchise broker?

  • A franchise broker works to match entrepreneurs with franchise companies.

What can a franchise broker do for me?

  • Franchise brokers are experts about the companies that they represent. By having a conversation with you about your needs, desires, and expectations for your franchise, a broker can match you to a company that you will enjoy owning and running. Good franchise brokers are also very knowledgeable about the franchising industry as a whole. If you have some basic questions about the ins and outs of franchising, they should be able to answer them for you.

Will it cost me anything to use a franchise broker?

  • Franchise brokers do not charge franchisees a fee for their services.

How do franchise brokers make money?

  • Franchise brokers receive a commission from the franchisor when they assist in the sale of a franchise. This commission does not effect the cost to the franchisee. It is therefore in the best interest of a potential franchisee to utilize the broker’s expertise in finding the “right” franchise.

What are the disadvantages of using a franchise broker?

  • Not all franchise businesses use a broker. In fact, the majority of franchises do not. A franchise broker will likely only show you the franchises that he or she represents. While one of these companies might be perfect for you, there might be other good options that the broker cannot tell you about. Because franchise brokers only make money when you purchase one of the franchises they represent, they may pressure you to make a decision.

Am I obligated to purchase one of the franchises a franchise broker recommends?

  • Buying a franchise is a very important decision, and you do not want to be forced into a purchase. Sometimes, franchise brokers represent the business that you want to purchase, and sometimes they do not. Luckily, you are under no obligation to do business with a franchise broker.

How can I make the most informed decision about my franchise purchase?

  • Franchise brokers are a great source of information, but keep in mind that they are not your only resource. To make a good decision about your franchise, you should also do your own research using books about franchising, the Internet, and the information provided by the companies you are considering. Once you have narrowed down your franchise choices, you should consider contacting owners of the franchises. They can give you valuable information about their own experiences with their franchisor.

MODERATED BY JOHN WALSH

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