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Franchise Broker Networks: How Many More Do We Need?

Today we have a special guest blogger: The Franchise King, Joel Libava. Joel has written an exclusive blog post on the popularity of Franchise Broker Networks. His opinions are as usual thought-provoking. * I am amazed by the sheer number of new franchise brokerage groups that have launched this year. What gives? The US economy is what gives. As more people are laid off, the pool of prospective franchise candidates will increase. I guess that all of the folks that are starting these new franchise brokerages are hoping to capitalize on this trend. The problem with their thinking is that there are already way too many franchise brokers in the marketplace vying for the attention of a very limited number of prospective franchise owners. Very few prospective franchise buyers actually go through with a franchise purchase. It is the nature of any big ticket item, especially one that involves a moderate to serious level of risk. {Full disclosure; I am an independent franchise broker/consultant, but used to be with a “group.”} I chose to become an independent broker/consultant for a variety of reasons. They include

  • No fee sharing. I keep 100% of my success fees.
  • No monthly group marketing fund contributions
  • I choose which franchisors to represent
  • No territory restrictions placed on me
  • No politics to deal with

Whether or not one should join a “group,” has to do with one’s personality. Some people do a lot better, and end up being more successful, by going it alone. Some enjoy being in a group, and the feeling of being part of a team can be powerful. Individual brokers generally don’t need to recruit more brokers, but since most broker networks are themselves franchises, they need market to prospective new brokers. Some may advertise that brokers can.

  • Become an entrepreneur!
  • Small one time up-front fee
  • No experience required!
  • Professional training available
  • No cold calling/Leads provided
  • No inventory/No employees
  • Executive level income
  • Work part-time or full time

Here is what those marketing messages really mean:

  1. The excitement of “becoming an entrepreneur” is a real feeling. So is depression. One can get rather depressed when they find out that it really takes several months to make their first franchise placement, and get paid on that placement.
  2. This is also known as a franchise fee. Most of the newer franchise brokerages are set up as a franchise. {Most of the older ones have converted to the franchise model} This means lots of rules, and a fee of anywhere from $20,000 on up. Also, you pay the brokerage a percentage of your placement fee, every time you make a placement.
  3. How many want ads have you seen that also say “No Experience Required?” This usually means a straight commission sales related job. In this particular case, it’s not a sales job. You have bought yourself a franchise, and you only get paid when you make a franchise placement.
  4. Training. It’s usually 3-4 days. It’s probably good training, too. There is a learning curve, and like anything new, you need to be patient.
  5. If you hate cold calling, then you may enjoy this career. Personally, I have never knocked on a door to find a potential franchise candidate. Now, about those “leads.” These come from the internet, and some of them can be quite good. It’s a numbers game, though. Figure on finding a one or two really strong franchise candidates per one hundred internet leads. Some lead sources are better than others, so the numbers may be better, sometimes.
  6. You have no inventory. That certainly helps in the expense category. You are a one-person show. Can you say Multi-Task? If you work better by yourself, this one’s for you.
  7. Income. This gets tricky. If you are thinking about becoming a franchise broker, what do you think executive level income is? More importantly, what do the executives of the franchise brokerage think it is? For instance, I have seen marketing messages from brokerage groups that say, “A Very Realistic 6-Figure Income Potential.” I guess by saying the word “Potential,” lawsuits are avoided. But “A 6-Figure Income” sure jumps out at you, doesn’t it? I just love marketing!
  8. Flexible hours can be fantastic. I love the flexibility I have. It took a long time to get there, though. It’s your business. Work at it any way you want.

Does it seem that I am being rather hard on these new franchise brokerages? I am. Someone has to wake up potential new franchise brokers about the reality of this business. I love what I do. It’s a blast, even during real tough times. {Like for instance, 2007-2008.} There are some really good franchise brokerages out there. The good ones will be very picky about who they award their franchises too. The average and below average ones will eagerly accept your check for $20,000, and see if you can make it as a franchise broker. {The Franchise King, Joel Libava, is a Cleveland, Ohio based franchise consultant, marketer, and no-spin franchise blogger. His company site is Franchise Selection Specialists , and he regularly updates The Franchise King blog}

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