Choosing a franchise is one the biggest and often one of the most difficult decisions a prospective franchisee must make. The amount of franchise opportunities available is just huge (according to a 2010 report by PricewaterhouseCoopers, over 900,000 franchises existed in 2010). It can be overwhelming to try and comb through all these different franchises to try and find the perfect opportunity for you.
This is exactly why franchise consultants and franchise brokers exist. These individuals work as franchise matchmakers, using their expertise to try and match an individual with a franchise that meets their interests, experience, and budget. However, franchise consultants and franchise brokers are not the same, and it’s important that you understand their very different motivations before you decide to work with on or the other.
True franchise consultants operate in a “fee-for-service” function. You, the potential franchisee, pay the franchise consultant upfront for his or her help in matching you with a franchise. The benefit of this arrangement is that the franchise consultant is your true advocate. He or she has no stake in the franchise that you eventually choose, only in your happiness with the match. Franchise consultants don’t limit themselves to a specific group of franchises. Instead, they can search all available opportunities, which may result in much more tailored recommendations.
Franchise brokers will often call themselves franchise consultants, or will shy away from the term ‘broker’, despite the accuracy of this term. Franchise brokers offer their services to potential franchisees for free. Don’t imagine for a second they want to match you up with a franchise out of the goodness of their heart. Brokers receive a commission from a franchisor when you become a franchisee. In essence, they act as recruiters, searching for individuals to convert into good franchisees prospects. Many franchise brokers are actually franchisees themselves, and their franchisor provides them with a list of approved franchises that will provide a commission upon a successful franchisee match. When you work with a franchise broker, you must be aware that he or she has a vested financial interest in guiding you toward a limited set of franchises that he or she has an existing agreement with. This could result in highly biased advice and pressure to choose a franchise that might not truly be a good fit for you.
Franchise Consultants vs. Franchise Brokers
It is certainly tempting to work with a franchise broker, especially because their services are free for the potential franchisee. Many franchise brokers are knowledgeable individuals who do truly care about helping their client make the right decision. However, they do have a biased agenda, and it is critical that you recognize that they earn their money from the franchisor. Additionally, not every franchise broker is made the same. Certain franchises pump out brokers with limited training and knowledge. These individuals are simply head hunters searching for a commission. If you do decide to work with a franchise broker, make sure you choose an individual who has experience and a reputation for excellence.
Ideally, if money is no object, a true franchise consultant is the best option, since this individual will work directly in your interest. He or she also isn’t confined to recommending franchisors from a specific and limited list of commission partners. However, franchise consultants can be expensive, and not every potential franchisee can afford their service.
In either case, I strongly recommend working with an experienced franchise attorney. This individual will be especially useful if you are reviewing recommendations from a franchise broker. An attorney is paid by you, and, thus, can point out legal issues or red flags that a broker may have overlooked or may not want to mention.
If you are considering buying a franchise, check out The AAFD Road Map to Selecting a Franchise, a free series of informational articles that can help you make a smart franchise decision.