Should You Use a Franchise Broker?

When you decide that you want to purchase a franchise, you will quickly become overwhelmed by opportunities. As soon as the brokerages get word that you're looking, your mailbox will be full of direct mail flyers. Plus, you'll probably want to use the Internet for research, which can only add to your confusion. So what's the alternative to purchasing a franchise alone? You can use a franchise broker.

Essentially, a franchise broker is a firm or network that sponsors certain franchisors. When they sell a franchise to a customer, they receive a commission on the total sale price, sometimes up to 50%. The franchisee (you) doesn't have to pay them anything, but there are a few disadvantages to this option. While brokers can help narrow down the possibilities and can give you specialized advice for your situation, you have to remember that they have a vested interest in which franchise you ultimately choose.

Most franchise brokers represent hundreds of different franchisors, usually in a diverse array of industries. Some might specialize in fast food or retail, but most keep their options open. When you sit down with a broker to discuss your options, you can bet that the franchises they push will be the ones that make them the most money. Sometimes this means that you'll be looking at potentially profitable businesses, but not always.

On the positive side, however, a franchise broker will help you weed out the prospects that don't fit with your personality or experience. He or she can break down the basics of each operation, from initial investment to managerial demands, then help line you up with a business that will flourish under your ministrations.

In addition, you can rely on a franchise broker to take care of the paperwork and anything else you don't readily understand. Many of the people who decide to open franchises are retirees or entrepreneurs who, while they might have experience in the corporate world, are somewhat lost when it comes to starting a new business. Not only can this protect your financials, but your legal interests as well.