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THE FRANCHISE BROKERAGE INDUSTRY MAY BE CHANGING (AGAIN)

by Joel Libava
 


The franchise consulting-brokering business happens to be a small part of franchising, but is discussed amongst franchise industry executives quite often.

Some executives say that they would “never sign on with one of those big franchise brokering groups,” citing reasons (heard from executives who have used them) that range from getting overwhelmed with sales leads that aren’t even remotely qualified, to having to pay huge commissions to brokers who never did anything but submit a lead.

I’ve heard most of the pro’s and con’s myself. That’s because I am a franchise broker. Actually, I like the “consultant” word better. That’s because I don’t actually “sell” franchises, per se. I do the matchmaking part. I don’t hand out sales literature. I do the introductions. The franchisors that I’m contracted with (currently about 45-50) make the 1st phone call to the candidates that I have submitted information on. I stay on as a guide…a confidant. I don’t sell.

I’m an independent. (But I wasn’t always)

I was involved in a major franchise consultant-brokerage firm, myself. For awhile, it was the best of the best. But then, things changed in the industry, and the ownership didn't adapt fast enough. New owners bought the old owner out {in a classic "end-around" play}, and decided to franchise it. I was very uncomfortable with the way things were done in that transaction, plus there were way too many conflicts of interest that I felt two of the new owners had, so I decided to leave this group.

Being independent suits me just fine. I would make a lousy franchisee.

Last year, I wrote a scathing article in which I strongly suggested that there were too damn many franchise brokerages and brokers around. (I made lots of friends in the franchise brokerage community with that one.)

One thing I do is speak from the heart. I speak the truth. I still feel that there are way too many franchise brokers around. There are now more brokers than concepts.

I am noticing one positive trend, as of late. There don’t seem to be any new franchise brokerage groups forming. We may actually be at the point where it’s mathematically impossible to add any more groups to the picture. That’s a good thing.

The franchise brokering industry has been around since the mid 80’s or so. Pre-internet. The 1980’s were still a time in which a handshake and a face to face meeting went a long way. My late father was one of the early franchise brokers, and he introduced a lot of local Clevelander’s to the business model of franchising.

I joined him in 2001. That was right about the time things like email, and the use of the “world wide web” were growing in popularity. I started learning about these new tools, and liked them. A lot.

The franchise brokerage I was with believed in the local approach; local brokers with local, leased office space, conducting face to face meetings with would-be franchise owners. I liked that model, too. But, I liked it for a little too long.

I only worked with people in my area. (Cleveland, Ohio) it was great. That was until the US economy took a beating. My business went downhill. Friends of mine from other industries were starting to suggest that I branch out…work with prospective franchise owners from all over the country. I refused. I was meeting with less and less people. More brokers were entering the scene. (Of course all of them are gone now) Cleveland was losing a lot of residents who just couldn’t find work, locally.

In the summer of last year, I decided to branch out. I had moved my office to the house to save some expenses, and more and more people were starting to learn about me from all over the country. Some were learning about me from other happy candidates of mine, while others were learning about me from my online presence.

So, I’ve branched out. I work with folks from all over the US. It’s fantastic. Now, I still meet with local would-be franchise owners face to face, and enjoy it, but by branching out, I’ve opened up a whole new world. Technology allows me to have high quality phone conversations, and video chats with them. I’m heavily involved in social media, and meet tons of great people online and offline, who help me find great franchise candidates. Of course, since the word “social” is involved, I help them find great prospective clients and customers for their businesses, too.

Every type of business seems to be experiencing change, right now. Technology is the major reason. The people that I’m working with really don’t seem to mind that I’m located 2,000 miles away from them. That’s because it’s about the relationship. It’s about trust. Trust seems to be easily transferred (at least for me) across the 2G or 3G networks today.

Finally, Google has probably brought the biggest change to business. If someone that I’m working with in Davenport, Iowa wants to check and see if I’m who I say I am, and that I’m legitimate, they can “Google” me, and in a couple of minutes time, get the skinny on me, and my business.

Most of the franchise brokers that I talk with on a regular basis are working with candidates that are not located in their backyards. It’s not just me.

Technology is changing our industry, and will continue to do so in ways that we don’t even know about yet.

Finally, if you’re a prospective owner, working with an experienced franchise consultant/broker could turn out to be a great thing. The excellent ones never try to sell you anything. They won’t push you into making a quick decision. And they won’t hound you.

For example, when I start working with someone, I make it clear that once I show them the proper franchise research techniques, the due diligence part is on them. If they have questions, they can call me anytime. I’ll follow up during the process, of course. But I’m really looking for them to take the initiative. I’m expecting them to call me. If I’m doing most of the calling, I’ve found that I usually have someone that’s not that serious, and that they may be looking at franchising as a “if I don’t find a job, soon, I’ll have to get serious about this option” kind of thing. If that’s the case, I gently tell them that I don’t feel that they’re ready yet, and that they are always welcome to call me when they’d like to re-engage.

There’s only a small amount of franchisors that consistently work with franchise consultants and brokers. In general, the ones that do, really like the model. The key for them is to make sure that find ways to stay top of mind with the individual brokers, or in some cases, with the larger broker groups. I have seen aggressive bonus programs, and other fairly creative incentives used to keep all of us motivated.

Franchisors that are thinking about using consultants and brokers should start asking their fellow franchise executives who the good ones are. They’ll know. The good consultants and brokers are all about relationships. Create some. You just may like what you get.

 
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Joel Libava
Joel Libava, The Franchise King® is a franchise broker, industry blogger, and marketer. His always gentle franchise insights and op-eds can be found on his award-winning The Franchise King Blog.

Website: www.thefranchiseking.com

 
 


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