Think of the franchise broker as a real estate agent. Real estate agents solicit sellers to list their houses with their agency. The real estate agent then sets up and promotes “open houses”ostensibly to market a specific house, but in reality in order primarily to identify and recruit potential buyers for their listings. Selling the “show” house is gravy.
Franchise brokers and franchise consultants do the same thing. They recruit companies to list their franchise and business opportunities with them. One of the most common means for attracting prospective buyers is to offer the “educational (or informational) seminar” that purports to educate buyers on how to investigate and buy franchise opportunities. Unlike real estate, where an agent who helps you find the house you actually buy will still earn a commission on almost any house your buy, albeit a reduced commission compared to their own recruited listings, franchisor brokers will only be paid by franchisors who have contracted with them to pay a commission. There is no multiple listing service in franchising. So if you don’t buy one of their listings, they won’t make any money.
Just as with real estate agents, so long as you understand their motivation and accept the fundamental premise that they will receive a commission for sale, you may find working with franchise brokers helpful. As with real estate agents, some are genuinely concerned with helping you find a good match that you can afford and that matches your risk parameters and others will be focused solely or mostly on making the sale. As with all sales people, the honesty and integrity of the selling process, their own representations and knowledge of the opportunity being sold and their concern with the quality of the franchise or other business opportunity will vary from individual to individual.
As ever, my mantra for all things franchise is “do your homework” and be careful where you place your trust. There are some things you just do not want to delegate or shortcut.
