Signs of a Bad Franchise Broker
If you search the Web for articles and advice on using a franchise
broker, you will quickly find article after article putting them
down; claiming they steer you in the wrong direction, that they only
show you their franchise, etc. etc. As a franchise broker I find
most of these articles rather insulting, but as I watch more and
more fellow franchise brokers operate, I am forced to realize that
these opinions do not exist without merit.
Rather than defend "all franchise brokers," I think it's
time to let the world know that just like any industry, all franchise
brokers are not created equally. I consider myself to be an honest
and ethical person both in life and in business, but have learned
that unfortunately not everyone in my industry conducts themselves
in such a manner. So, rather than sit by letting the bad brokers
ruin the reps of all brokers, I have created a list of things that
can quickly determine the true value and ethics of a franchise broker.
1. If Your Franchise Broker Speaks Poorly of Franchises NOT in His
Portfolio
Allow us to be biased, as promoting our group of franchises is how
we make our living. But, any smart and realistic franchise broker
should be well aware that we represent a fraction of what is actually
available. A lousy and lazy franchise broker may speak negatively
of franchises not in his portfolio; a successful one will use the
opportunity to broaden his knowledge of the industry and even try
to align himself with the other franchises he finds his clients are
attracted to. Either way -- a good franchise broker knows and respects
that you are looking at other franchises; a bad one does not. If
yours does not -- run!
2. If Your Broker Seems Shocked or Offended When You Don't Jump
at at Least One of His Four Suggestions
Some franchise brokers are taught to listen to a client's skills
and goals, and then to present three to four franchise opportunities.
If you don't like any of the four suggestions then it must mean they
didn't hear you correctly or else you are not correctly explaining
your skills and goals. I always found this to be silly. These days
people typically look at a lot more than four franchises before making
a decision, and any good franchise broker knows this. If your franchise
broker seems shocked or offended that you don't jump right on one
of his four suggestions -- run!
3. If Your Broker Promotes Franchise Brokering as Your Best Opportunity
If franchises knew how many of the brokers they pay tell their clients, "Why
own a franchise? There is a lot more money to be made in being a
franchise broker than in being a franchise owner," they would
probably choke. Sure we run across candidates who may indeed be a
good fit for this business, but despite the truth, it's very easy
to make this business seem very easy and very lucrative. Respectable
franchise brokers should not steal opportunities from the franchises
they represent to make a few easy bucks selling the illusion of easy
money as a franchise broker. Some are more successful than others
in this business, but being a franchise broker is anything but easy.
If your broker tells you right out of the gate the easy money is
in joining him as a broker -- run!
4. If Your Broker Steers You Away from All Franchises and
into a "Business
Opportunity"
I was recently on the website of a franchise broker who stated fact
after fact on the benefits of owning a franchise opposed to starting
your own small business. Things like "strong support network," "a
lot fewer franchises fail than independent business," etc. etc.
I clicked his "My Favorite Franchise" link to find that
his favorite franchise wasn't a franchise at all! It was a "business
opportunity," and the reasons he favored it was because it did
not carry any of the "baggage" a franchise carries; such
as royalties, control, large investment, etc. Not that there aren't
some great business opportunities out there, but who is this guy
serving?
Business opportunities are generally easier to sell because they
are lower investment and we can promote them based on "how much
money you will make" -- something that is highly illegal in
franchising. And business opp deals tend to close faster than franchise
deals. This broker chose a Biz Opp as his favorite not because it
can or will make YOU -- his supposed client -- more money, but because
it makes him more money; faster and with less effort. I think "franchise
brokers" who spend their time selling against franchises while
promoting cheap, unregulated business opportunities are doing no
one any good but themselves, and are the primary reason brokers have
earned this "snake oil salesman" stigma. If your franchise
broker starts trying to sell you a business opportunity based on
how much money it is going to make you -- and with fewer headaches,
expenses or hassles of an actual franchise -- run!
5. If Your Broker Pressures You into Making Decisions
I once heard a franchise broker say that franchise candidates are
grapes -- and within a few days they turn to raisins. Basically
-- press them into making a decision fast or else they will become
raisins. I've done pretty well in this business, but I have yet
to see a deal happen as quickly as this statement insinuates. In
fact, most of the deals I have been involved in take months to
come to fruition. Had I been impatient and pressured, or given
up on my candidates for not making a decision right away, I would
not have made a nickel in this business to this day. Buying a franchise
is a very big and very important decision for someone to make and
any good franchise broker respects this. While it is possible that
someone can come along and buy the territory you are interested
in while you do your due diligence, I see this line used far more
often as a tactic to pressure someone than it being fact. If your
franchise broker pressures you into making a quick decision, or
eludes that you won't be taken seriously unless you are ready to
buy now -- run!
6. If You Know More About Franchising Than Your Broker
Anyone can be a franchise broker. I mean anyone! You can spend a
few thousand and join an organization or you can start calling
franchises asking if they will work with you as a broker and abracadabra
-- you are a franchise broker. No licensing, no tests, no real
training. I have attended conference calls where franchise brokers
didn't even know that "cash" and "liquid" were
synonymous. Frightening! The franchising industry is huge so you
cannot expect your broker to know everything, but he should be
a source of knowledge to you. If your franchise broker stammers
and stutters over simple questions about this industry -- run!
Is this article meant to run down franchise brokers? Heck no --
I am one! This article is meant to rebut the article after article
you read running all franchise brokers down as used car salesmen.
There are good and not so good franchise brokers in this world and
unfortunately more bad than good. At the same time, a good franchise
broker can and will offer you a wealth of information, inside tips,
guidance and understanding; making your franchise exploration a lot
easier and less stressful. If you are working with a franchise broker
and feel he's selling snake oil, don't be so quick to judge the industry
as a whole -- but instead consider finding yourself another broker.
This article was provided by Marc Stephens, CEO of The Franchise
Select Group
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