What Is a Franchise Broker? Understanding These Key Industry Players

In franchising, there are key players other than franchisors and franchisees who make the industry go round. Franchise brokers, for example, are professionals who help match clients with franchising opportunities that meet their specific goals or needs. 

Some franchise brokers work directly with the franchisor while others take on individual clients. Both arrangements have the same goal: to facilitate a strong match between a franchisee and a franchisor. 

What Does a Franchise Broker Do?

One of the main objectives of a franchise broker’s job is to perform market and client research. By collecting this data, they are better equipped to approach the matching process. Market research allows the broker to better understand what franchise opportunities are available in the local area, as well as the history of each brand and the strength of their models. Brokers take this market and franchisor-specific data and pair it with each client’s interests, needs, prior experiences and long-term goals. 

Additionally, some brokers will provide a personality test or questionnaire to gather as much information as possible about the prospective franchisee. This information can help the broker begin to narrow the playing field and present specific franchise opportunities to each candidate. Some of the questions will likely include:

• What is attracting you to business ownership?
• How many hours and what time of day do you like to work?
• How does managing people make you feel?
• What sort of lifestyle are you interested in as a business owner?
• Is a recognized brand name important to you?
• Do you want to have more than one location?

Once the broker and the client have worked together and chosen a specific opportunity, brokers can continue to serve as a resource for the franchisee as they talk with the franchisor and complete necessary paperwork. This can be especially helpful for franchisees who have little experience when it comes to the franchise agreement process. 

Valuable Industry Connections

An additional benefit of working with franchise brokers is the wealth of knowledge and experience they can bring to the process. Many brokers have strong industry connections that can support a franchisee in their new business journey. Brokers can pull from their connections to accountants, franchise attorneys and real estate professionals to continue supporting the franchisee. 

How Franchise Brokers Get Paid

Brokers don’t charge franchisees for their services. Instead, franchisors will be charged a percentage of the franchise fee when they make a sale. Franchise brokers’ commissions vary, but typically they are paid up to 50% of an initial franchise fee that could range between $30K and $50K. In other cases, franchise brokers are paid a flat rate. 

The Pros and Cons

The most clear benefit of working with a franchise broker is the help they provide when weeding through thousands of franchise options. This can save candidates massive amounts of time and energy. A broker can also clarify your (potential) preconceived preferences about franchise industries and whether they are realistic. This will stop you from wasting more time. 

However, as with any profession, some brokers are better than others. Some may represent larger, more well-known franchises while others may have a portfolio of smaller- or mid-range franchises. That’s why it's typically a good idea to talk to multiple brokers to make sure you’re seeing all of your options. 

Overall, working with a franchise broker has its perks. These key industry players serve an important role in the franchise industry, helping future entrepreneurs find the right opportunities.