What Is a Franchise Broker, and Should You Work With One?
Let’s start with the basics. A franchise broker (or advisor/consultant) is similar to a real estate agent. They connect buyers and sellers. In the franchise industry, this means they connect potential franchise investors with franchisors who may be a good mutual fit. If a successful match is made and their client decides to buy the franchise, the broker is paid a referral fee by the franchisor.
Should You Work With a Franchise Broker?
Absolutely—if they are good at what they do. Unfortunately, this doesn’t include everyone in the industry. The franchise broker field includes seasoned professionals who have been in franchising for decades, some of whom have owned or still own franchises and have worked for franchisors. These experts truly know their stuff. However, there are also brokers who may know less about franchising than you do. Becoming a franchise broker only requires an investment of time and money (more money than time), making it easy for anyone to get started. It is crucial to ensure that the advice you receive comes from a knowledgeable and experienced broker. At FranCentral, our mission is to connect prospective franchisees with true industry experts.
How Are Brokers Paid?
Like most brokers in any industry, franchise brokers are paid by the seller. In this case, the franchisor compensates the broker if they bring in a new franchisee. A good broker will guide clients towards franchises that are a strong fit. A bad broker might steer clients toward the brands that offer the highest commission.
Do You Pay More for a Franchise When Using a Broker?
No, you do not. Franchise brokers are typically paid a portion of the franchise fee, and assuming the franchisor is operating legally (which is a safe assumption), everyone pays the same franchise fee. So, apart from the risk of getting poor advice, there’s no financial downside to working with a broker.
What Can a Franchise Broker Do for You?
A good franchise broker can provide tremendous value. They offer real-world insights on specific brands, the industry, and the franchise-buying process. They can assist with research and legwork, helping you avoid franchises that are already sold out in your target market or may decline you based on factors like investment level or skillset. A knowledgeable broker is also an industry insider and can often expedite the process compared to doing it all on your own.
Can You Work With More Than One Broker?
Yes, you can. Unlike real estate, where you might sign an exclusive contract with a buyer’s agent, it’s common for people to work with multiple franchise brokers, sometimes by accident. Since you’re making a significant investment, it makes sense to gather as much advice as possible. However, it’s a good idea to extend professional courtesy to your brokers, so they aren’t stepping on each other’s toes or wasting time. Being a franchise broker isn’t easy money; the good ones work very hard to help their clients.
Are Certified Brokers Better Than Non-Certified Ones?
Unfortunately, no. Unlike financial advisors or real estate agents, there’s no third-party or government agency regulating franchise brokers or their credentials. Titles like “CFC” (Certified Franchise Consultant) often come as part of a package when joining a broker group. While these certifications indicate a commitment to learning, someone can become a CFC in just a few weeks, even if they start with no knowledge of franchising. On the other hand, many highly knowledgeable brokers carry no official title but have years of industry experience.
Should You Work With a Local Consultant?
While it’s not essential, it can be advantageous. Face-to-face meetings can be helpful, but more importantly, a local consultant has a deep understanding of your market and how different franchise models might perform there. Any broker can look up population statistics and median household incomes, but a local broker truly knows the area. Have you ever seen a franchise open in a location and thought, “Why did they open there?” It’s likely because the owner took advice from someone who didn’t know the local market, setting them up for potential failure.
If you’re interested in working with a true industry expert who is local to you, check out our Local Franchise Consultant Directory for recommendations. Our directory is unbiased and includes top professionals from various broker networks, as every company has both experts and non-experts.
