What Is a Franchise Broker?
A franchise broker is an intermediary who helps franchise brands find potential franchisees to expand and grow their business. They’re often likened to a matchmaker. They work for the franchisor to form relationships with entrepreneurs and pre-qualify potential franchisee business owners.
Franchise broker networks like International Franchise Professionals Group (IFPG) and International Franchise Association (IFA) are brimming with well-connected individuals. Members may represent one business with a portfolio of different franchise opportunities, or they may specialize in a certain type of franchise. These groups are eager to make referrals to help the entire franchise business model grow.
The best franchise brokers always seek opportunities to match prospective buyers with the right franchise owners. Like any good matchmaker, they must get to know all parties involved and understand their qualifications, budgets, and interests. After pre-qualifying a potential franchisee to a franchisor, they help both parties navigate the franchise agreement and do due diligence during the negotiation process.
What Is the Difference Between a Franchise Consultant and a Franchise Broker?
While a franchise broker connects prospective franchisees with franchisors and earns a commission from the franchisor, a franchise consultant serves a slightly different role, dedicating their services exclusively to the potential franchisee.
Franchise consultants don’t necessarily have direct relationships with franchisors or get commissions from franchise sales. Rather, they assist individuals who are considering entering the world of franchising. They’re trusted advisors that are knowledgeable about the franchising industry and can offer guidance, expertise, and support to those exploring what it takes to own a franchise. They have a strong understanding of market research and are experienced at drafting franchise agreements and preparing the Franchise Disclosure Document (FDD).
A professional franchise consultant will help their clients assess their goals, strengths, weaknesses, and financial situation to determine if franchising is the right path for them. In turn, the clients pay them directly for their consulting services, regardless of whether they pursue franchise ownership or not.
Who Hires a Franchise Broker?
Franchisors seeking to expand their network of franchises are likely to hire a dedicated broker or team of brokers to help them find investors. Prospective franchisee owners may also seek an affiliated broker for more information.
A franchise broker can:
- Save a franchisor time
- Raise awareness of a new franchisor to a broader network
- Answer questions about initial franchise fees
- Advise potential franchisees about industry insights, risks, and rewards
- Provide access to exclusive opportunities for prospects
- Share advice
- Help with franchise agreement negotiations
Working with a well-connected broker can expedite finding potential buyers and expanding the footprint of a franchise.
How Do Buyers and Sellers Work With Franchise Brokers?
The franchise world can be overwhelming for buyers and sellers, but franchise brokers help streamline the process and serve as an essential matchmaker to facilitate productive growth.
Sellers or companies that franchise their business hire brokers to represent the business and find potential franchisees. The sellers count on the broker to educate the prospects about the franchising opportunities.
A potential franchise buyer interacting with a franchise broker can also leverage their knowledge and insight of the franchise to understand the pros and cons of the business. The broker may be privy to special information, including exclusive franchise opportunities. They may also give honest feedback to a buyer who wants to pursue franchise ownership, but isn’t yet well-qualified.
Whether you’re looking to expand your franchise network or are a potential franchisee, working with a broker can put you on the fast track to a successful deal.
How Is a Franchise Broker Paid?
Payment is usually a commission or fee from the franchisors when a prospective franchisee they've referred successfully purchases a franchise. This holds the broker accountable for using their network to find qualified prospects and help a franchisor expand the number of franchises.
How to Find a Franchise Broker
Finding a reputable franchise broker is an important step, whether you’re the business owner looking to expand with new franchises or a prospective buyer hoping to purchase a franchise.
Here are some steps you can take to find a good franchise broker:
Ask for Referrals
Tap into your professional network. Speak to your lawyer, accountant, or locate a franchise consultant. You can also get referrals from other franchisees who have successfully used a franchise broker.
Do an Online Search
Search online for accredited franchise brokers in your area. Browse websites or profiles on professional directories, like the BizBuySell or BizQuest Broker Directories, to learn more about the brokers representing different businesses in the franchise system.
Evaluate and Interview
Just because a franchise broker comes highly recommended, doesn’t mean they’re the right fit for your interests. Be sure to speak with them to understand their experience in the industry. They should be able to explain the franchising process, help buyers and sellers understand the potential risks and rewards, and offer insights that instill confidence. The brokers should be transparent about their compensation and any conflicts of interest.
Check Credentials
Verify the broker's credentials, including any licenses or certifications they may have related to the franchise industry.
Trust Your Instincts
Ultimately, trust your instincts when selecting a franchise broker. It’s important to choose someone who is honest, makes you feel confident, and will help you grow whether you’re looking to launch your business into a successful franchise or want to make a life-changing franchise investment.
Check out BizBuySell’s Broker Directory to find a professional with franchise experience help you navigate the process of buying or selling a franchise.