Five Reasons Why Franchisors Need Franchise Brokers

franchise broker

“Franchise Broker” is Among the Most Misunderstood Terms in Franchising, But It’s Worth Knowing

When people used to ask me what I did for a living, I’d often stumble over my words and dive into a long explanation that typically resulted in a glazed look of confusion. Unlike accounting or teaching, I’m not in a business everyone knows.

I happen to be in the franchise broker business, but “franchise broker” is among the most misunderstood terms in franchising. And it’s not because the role of a franchise broker is super complicated. It’s because people use several interchangeable words to describe a franchise broker. These include franchise consultant, franchise referral consultant, franchise matchmaker, and franchise coach. To further complicate things, the franchise broker business goes by several names too, including the franchise consulting business, franchise broker network, and franchise brokerage. You can see why it gets confusing…

Franchising has its own language that’s unfamiliar to the outside world. So my new rule of thumb when folks ask about my work is to reply with this question: “Are you familiar with Realtors?” Then I’ll continue with, “well, franchise brokers work similarly, except with franchise opportunities.” Usually, a light bulb goes off. Then I’ll explain that I run a franchise broker network and discuss the importance of a broker to a franchise business.

How Important is a Broker to a Franchise Business?

So what does a franchise broker do and how important is a broker to a franchise business? In short, franchise brokers help franchisors grow their systems in the most efficient and effective way. Here’s how:

1. Franchise Brokers Make Recruiting More Efficient

Franchisors have a ton on their plates. Not only are they focused on their primary business (whether that’s burgers, yoga, painting, etc.), but they also have a franchise operation to run. They have to manage many franchise-related items, including training, support, and legal considerations. Franchisors spend lots of time talking to people who are considering investing in their brands. That’s where franchise brokers come in. The discovery process is useless if a candidate can’t afford, isn’t interested in, or simply doesn’t like the brand. Franchise brokers do all the leg work and uncover critical items before the candidate ever reaches the franchisor. Sifting through endless leads to find qualified candidates is something franchisors are happy to take off their plates.

2. Franchise Brokers Find Quality Candidates

Finding quality candidates is equally as important as finding qualified candidates. Good franchise brokers make it their business to understand exactly the type of candidate a franchisor seeks, finding both quality AND qualified candidates. Some brands might want a passionate, hands-on owner/operator and others prefer franchisees who are large-scale business builders. Depending on the mission and values of a franchise, the definition of a quality candidate varies. Franchise brokers know how to ask the right questions to ensure a good fit. 

3. Franchise Brokers Act as Partners

Normally, a franchise broker will work hand-in-hand with a franchisor, assisting a candidate through the franchise discovery process. As a neutral party, the franchise broker often becomes the person the candidate feels most comfortable with. A franchise broker can help a candidate work through indecision and worry. The broker finds the answers to questions that the candidate may not feel comfortable asking the franchisor. 

4. Franchise Brokers Help the Process

Staying focused through the franchise discovery process requires a lot of organization. Franchise brokers can help both the candidate and franchisor stay on track with reminders. Often, there are multiple steps to manage, including reviewing the Franchise Disclosure Document (FDD), contacting current franchisees in the system (a.k.a validation), and securing funding. Franchise brokers guide candidates through the entire process and help reduce last-minute surprises and bumps in the road.  

5. Franchise Brokers Save on Overhead

Instead of paying a sales force to interview hundreds of candidates (regardless if they work out or not), franchisors only pay franchise brokers when a franchise is awarded. Franchise brokers essentially become an extended part of the team without significant extra costs. And another perk for franchisors is that broker leads close at a significantly higher rate than virtually any other type of lead. The FranConnect Franchise Sales Index report for the first half of 2020 showed that the greatest source of leads that became deals came from franchise brokers. According to the Franchise Sales Index, the average lead-to-deal ratio of brokers equates to approximately 18 leads to close one deal, versus the lead-to-deal ratio of all combined sources, translating to 120 leads to make just one sale.

As you can see, franchise brokers provide an extremely valuable service, helping franchisors grow their systems with the best people in the most efficient way. I have been in the franchise broker business for a long time and have seen tremendous growth. That growth, in large part, has been thanks to franchise brokers.  

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Don Daszkowski is the founder of the International Franchise Professionals Group (IFPG), a membership-based franchise consulting network with more than 1,200 franchisors, franchise consultants and vendor members. Together, IFPG members guide aspiring business owners through identifying and investing in franchise businesses.
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