Killer Mistakes Franchisors Must Avoid When Engaging An External Franchise Broker

The process of franchise brokering is often a long and tedious process - a typical time frame from initial contact with a prospective franchisee to actual signing of the franchise agreement takes somewhere in the region of 90-120 days.

Appointing an external franchise broker to handle franchise sales could yield advantages such as affording the franchisor more time to focus their efforts on maintaining the franchise system, increasing franchisee performance, researching and develping new products to increase revenue across the system, etc. So basically, a franchisor who appoints a franchise broker will most probably find themselves with more time and focus to do other stuff.

But since the franchise broker will be representing the franchise brand, and could determine the rate of franchise growth, franchisors need to ensure that this role is outsourced to the right people.

Related: A Typical Franchise Approval Process

 Diamond Head 24 Jan

What Should Franchisors Look Out For?

1. Don't Believe Everything Being Presented

Many franchise brokers will trumpet their success stories when pitching to be appointed by franchisors but what about the failures? Ask to see the whole client list, not just those that are used to impress. Find out how many have been left by the side in favour of easier-to-sell franchises.

So don't confuse experience with competency and results because many franchise brokers fail their clients on a regular basis and then move on to the next concept. Don't be there just to buff up the franchise broker's client list.

2. Meet With The Actual Salesperson Who Will Be Hands-on With Your Franchise Brokering

After meeting with the owner (or sales representative) of a franchise brokering company, you feel they nailed every meeting and could provide everything you were looking for. However, in most cases, the owner or sales representative will not be hands-on in dealing with your franchise sales.

Instead, an employee (another salesperson) of the franchise brokering company will most likely be tasked. This salesperson is the first point of contact with prospective franchisees, and perhaps will also portray the first impressions of your franchise concept. Meet with this salesperson and find out who they are.

3. Be Open To Paying A Retainer Fee, Not Just Commission

Most franchisors view a commission-based arrangement as the most efficient method when dealing with franchise brokers but in fact, this could provide higher risks because the role of a franchise broker far exceeds simply finding franchisees. Franchise brokers provide a highly underrated value-added service to the franchise sales process - recruiting qualified prospective franchisees and screening out unsuitable candidates.

Taking in mind that initial contact with a prospective franchisee to actual signing of the franchise agreement typically spans 90-120 days, franchisors should understand that the franchise broker is not being paid anything during this period. Since everyone needs to eat, sometimes this leads to turning a blind eye to unqualified prospective franchisees in order to secure a deal.

However, if a retainer is in place, the franchise broker would have peace of mind knowing there is flowing income and could better focus on the task at hand at providing quality franchise leads to the franchisor.

4. Ask For A Marketing Plan

Try to understand the methodologies of the franchise broker - are they actively looking for prospective franchisees or simply waiting for magic to happen? Ask if activities or events dedicated to your franchise concept will be organized. In fact, demand for such from the franchise broker.

Close

Engaging franchise brokers to handle franchise sales is a good way for franchisors to streamline their focus. And since franchisees could make or break a franchise system, the quality of the franchise broker should also be up for consideration here. Remember, a strong franchise broker can help your franchise succeed while a weak one just rides on your coattails and instead needs you to help them succeed.

And if possible, pursue some sort of franchise marketing on your own. You can start with simple methods like a franchise listing such as Franchise Feature.


You might also like...