What is a Franchise Broker, and Do I Need to Hire One?

Franchise brokers play a vital role in the development process. They act as a professional middleman and matchmaker that connects entrepreneurs to brands, leading to a win for all parties involved. 

So, what’s the catch? For franchise candidates, there isn’t one: brokers are completely free of charge to use, as they are paid a portion of the franchise fee by the brand once you sign. 

Many people are unaware of this fact and the benefits having a broker on their side brings to their discovery process. Some don’t even know that this kind of service exists. Brent Foster is a perfect example of this.

Foster is a multi-brand franchisee with Tutor Doctor and Superior Fence and Rail. When he and his wife invested in their first franchise in 2015, they did it all on their own and quickly found out how tedious the process is. Two years later, he ended up opening his own consulting firm, BSLK Consulting, to become the kind of resource in the community that he needed back then.

“Looking back, it would have been fantastic to have had that hand holding and been given options to look at,” Foster explained. “I literally started my company because I wanted to help keep people from making a bad decision like we potentially did in our first run.”

Being that a broker is a no-cost asset, most people (about 95%, Foster estimates) are eager to use one once they learn more. The only legitimate reason not to would be if you are determined to handle everything personally. 

“If you don’t want to feel that you're being guided into specific options and are comfortable doing your own research, you don't need a franchise broker,” said Ron Bender, senior director of franchise relations and development at Threshold Brands. 

“But the reasons to use one are plentiful: they help you learn about yourself, your goals, your skill sets, strengths and weaknesses, and then help you match that to a franchise that will help you attain your goals and help you pursue your dreams,” he added.

Once you connect with a franchise broker, they will typically do a personality profile and skills test to learn more about you. After a few in-depth conversations explaining your goals, hopes and restrictions, they will peruse their portfolio of brands to find a few good fits. Then they will connect with you over multiple sessions to provide you with the details and information and give you time to mull them over before reconvening to discuss more and further narrow down the options. 

“Many times, the broker has to teach the candidate that there are many, many options in franchising and that they are choosing something for more of a reason than just loving the product or service,” Bender said. “They have to educate a candidate on how to research and why to choose a franchise.”

The proceedings look a little different for every broker and franchisee, but this process can go on for weeks or months. It’s not something that should be rushed because you want to make sure you’re choosing a suitable business venture. A good broker will ensure to constantly keep you on a reasonable path.

Once a candidate zeroes in on a specific company, the broker will make the introduction and essentially hand them off to the brand to do their discovery process. But the relationship doesn’t end there. 

“I always tell candidates that I’m here for regular calls as needed when they’re in front of the brand. I'm standing in the wings acting as a cheerleader and to bounce ideas and questions off of,” Foster said.

“Good brokers are going to stay engaged throughout and check in with them throughout to find out how they liked the information the brand gave, the impression they got of the executives and their overall thoughts on the opportunity. If the feedback is poor, they’ll know not to refer that brand again,” added Bender. 

Franchises will partner with brokers as a form of outsourcing development efforts to professionals who will do the initial legwork and bring them qualified leads. It opens up companies to a whole new pool of investment candidates. 

Threshold’s portfolio of brands, for example, offers ranging referral incentives for signings, giving brokers between $30,000 and $50,000. 

“Franchise companies make the most of their income from ongoing royalties from performing franchisees, so a portion of the franchise fee on the front end doesn't make or break them,” Foster explained. “They’re looking to accelerate their growth, and we bring them the right candidate; that's why they're willing to share with us.”