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The Future of Franchise Brokerage Services
Even in the face of a tech revolution, franchise brokerage services remain irreplaceable in building successful connections between franchisees and franchisors.
Chuck McKinney, principal at Franchise Connection Partners, became interested in the world of franchise brokerage when he was looking into entrepreneurship opportunities and realized the process of selecting the right franchise could be a career in itself. And despite the technological advances that have made navigating the franchise landscape easier, McKinney still feels the quickest path to success for franchisees includes expert insights from an experienced broker.
1851 Franchise spoke with McKinney about the vital role of franchise brokerage services in laying the groundwork for entrepreneurial success.
McKinney pointed out that at any given time, there are three to four thousand active franchises worldwide, with around 300 new franchises launching each year. However, he explained that only a meager 20% of these manage to surpass the critical milestone of a hundred units. Granted, you could opt to invest in an industry giant — a franchise that is well-established and has well over 100 units — but this can be expensive and you might be more interested in growing with an emerging brand. How can you determine which franchises will experience success when so many that seemed promising have not come to fruition? That’s where franchise brokers like McKinney come in.
Years of Knowledge and Experience: Assisting Franchisees and Franchisors Alike
Even the most intelligent prospective franchisees with great researching skills will find it difficult to do their due diligence on a brand that is just starting out. The fact is, there isn’t a lot of data readily available to make an informed decision. However, franchise brokers have strategies for predicting continued growth and the success of an upcoming brand.
“How do you do the due diligence to really decide if you should be jumping on a hot trend or if you're all a bunch of lemmings running off the cliff? It's not easy and brokers know a few tricks that help vet a fast-growing franchise,” said McKinney. “Brokers know the questions that you need to ask — whether they're metrics for building their infrastructure during fast growing times, or what their franchise support organization looks like and how it's been growing over time. People love the idea of getting onto something first, but just because it’s growing quickly doesn't mean it's growing successfully.”
McKinney also noted that culture alignment between a franchisee and franchisor is one of the most significant factors in ensuring a mutually beneficial and successful relationship. His wealth of experience enables him to guide individuals through the process of evaluating a brand's culture and values so he can help franchisees make informed decisions.
As for franchisors, new and emerging brands require brokers to kickstart their development process, helping them overcome the challenges of building organic leads when no one knows who they are. While some may argue that franchises outgrow the need for brokerage services over time, McKinney suggested that even established brands with 500 to a thousand units still rely on brokers for at least 50% of their sales. As industries mature and more players enter the market, prospective franchisees face difficulties differentiating between brands, and franchise brokers provide valuable insights.
AI: The Uses and Drawbacks in Delivering Franchise Brokerage Services
Artificial intelligence (AI) has become a buzzword across industries, promising transformation in any business. So with all of this modern technology at our fingertips, why shouldn’t we rely on it for advice, research and information on franchise opportunities?
Despite these technological advancements, McKinney believes that human guidance remains crucial in helping these prospective franchisees navigate the complexities of the industry. He did acknowledge the potential benefits of AI in research and data compilation, but he believes some interactions are better off without it. People prefer the human touch, especially when faced with significant decisions like buying a franchise.
“I've seen some franchises trying to use it,” he said. “Some brands are trying to use phone automated assistance with AI technology. People don't like engaging with machines. It’s just a little off-putting. It makes you think, ‘Wait, am I not important enough to have the opportunity to actually talk to a real person?’ That’s a feeling you can never take away, particularly in the buying process.”
McKinney also explained that the magic behind good brokers lies in their ability to help individuals discover what truly matters to them, a task AI struggles to achieve.
“You don't know what you don't know about the process of selecting and investing in a franchise if you’ve never done it before,” he said. “It'd be one thing if a franchise candidate really knew how to articulate what it was that they wanted, but often a good broker will take the time to help a person discover what's truly important to them and then use that data to conduct some research and help them find a good franchise.”
AI's limitations become apparent when franchise candidates can’t articulate their desires. AI is limited to answering questions, but if you don’t know what to ask, you’re out of luck. A broker, however, can offer human guidance, advice, examples and industry knowledge that is irreplicable by technology.
Franchise Brokerage Services Still Hold a Vital Role in Franchising Success
Franchise brokerage services will continue providing a guiding light for individuals seeking entrepreneurship opportunities. While technology can be helpful to a point, an experienced broker can provide invaluable insights to ensure that individuals navigating the franchise landscape will be able to build a base for entrepreneurial success.
Interested in learning more about franchise opportunities? Check out these resources:
