Franchise Broker or Franchise Consultant?
There are literally hundreds, if not thousands, 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/salespeople began calling themselves consultants. The real reason for the change could be argued, but most likely and obvious reason is that ‘consultant’ sounds 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’s the whole idea?
Follow the Money
Second, understand what is so different about the functions. The franchise broker (by any other name) represents various opportunity sellers, not the buyers, and is 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 – the franchise brand. 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. A franchise consultant charges the buyer a fee to work directly for, advise, and protect 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 franchise broker or salesperson. Why else would it be free to you?
Fourth, is there a benefit to brokerage? Yes and no. The broker might introduce the prospect to franchises they might otherwise not see, but the downside is a barrage of introductions that creates more confusion than clarity. A franchise buyer should first have an idea of where they want to go and what they want to do. Most importantly, the buyer should develop a personal plan for buying a franchise, and that plan should always precede the consideration of various opportunities. The Focus Program offers excellent guidance for developing such a plan.
So, what’s the truth? If the franchise introduction was free and you buy the franchise, you paid a lot of money for a new business and part of that money paid your franchise counselor. Buyer beware, buyer beware when buying a franchise.