Franchise Broker or Franchise Consultant?

There are literally hundreds of ‘franchise brokers’ who now label themselves ‘franchise consultants’. Prospective entrepreneurs who are interested in buying a franchise need to educate themselves on this important subject.

First, there is an enormous difference between what was traditionally a broker versus a franchise consultant. Somewhere in the 1990’s franchise representatives/brokers began the practice of labeling themselves as consultants. The real reason for the change could be argued, but most likely due to ‘consultant’ sounding more attractive than broker. Unfortunately the change also confused who was doing what in franchising. And it certainly confused prospective franchise buyers who were new to the franchise industry. But, maybe that was the whole idea.

Follow the Money

Second, understand what is so different about the functions. The broker is representing various opportunity sellers, not the buyer) and will be paid a fee (or commission) if the prospect chooses one of the franchises with whom they have contracted for their services. So buyers must ask themselves a huge question: Who is the client when a prospect is working with a broker? The answer is quite simple; the client is the entity paying the broker’s fee. And, no matter how that broker wants to twist the definition of the relationship, if they are to be paid a fee by the seller, the seller is the client. A franchise consultant on the other hand is a ‘fee for service’ provider. This ‘consultant’ would receive a fee to work directly for a buyer for the purpose of advising and looking out for the buyer’s best interest. The buyer must choose which resource is best for their needs and interests. A good article on this important topic can be found here: Brokers called Consultants.

Third, what’s the easiest way to identify a franchise broker labeling themselves a consultant? This is the simplest thing of all. When you see an advertisement for FREE FRANCHISE CONSULTING, you have a broker. Why else would it be free?

Fourth, is there a benefit to brokerage? Of course there is, as the franchise broker can introduce the prospect to specific franchises that they might otherwise not explore and that’s of value. On the other hand, a barrage of introductions generally serves to create more confusion than clarity. The first time franchise buyer should first have an idea of where they want to go, what they want to do, and most importantly, how to develop that plan. And that plan should always be put ahead of considering dozens of opportunities. The Focus Program offers excellent guidance for developing such a plan.