Franchise owners and potential buyers are finally experiencing marketplace relief after the unprecedented effects of the pandemic. According to a recent report from Bloomberg, food costs have begun to drop for the first time since the start of COVID-19. As more and more industries discover ways to save money and retool their budgets for the new year, those involved in the food franchise industry can expect a large productivity spike as lower food costs coincide with an efficient shipment and delivery system. Now may be the optimal time to buy a franchise business.
Purchasing a franchise is a complex decision, and acquiring a new franchise can lead to profits and success down the road as well as increased business experience. However, failure to leverage franchise resources correctly may lead to missed opportunities, plummeting revenues and foreclosure.
Such concerns can be answered and addressed by engaging a franchise broker in the purchasing process. Often called franchise consultants, these experts are used by franchise brokerage firms to promote the sale of their franchises. They often work in a company setting and are hired by franchisors to help them sell their business. Franchise brokers show potential customers all available franchise opportunities and provide information to facilitate well-informed decisions.
Many people looking to buy into franchises are confused or unfamiliar with the role of a franchise broker. Often, a lack of understanding of the franchise broker role can lead to concerns about the legitimacy of the broker role. According to professionals, the benefits of a franchise broker far outweigh the drawbacks. Often operating on commission-based compensation, franchise brokers make money after a franchise is sold.
Brad Porterfield, an experienced franchise owner in Los Angeles, California, understands the value of a franchise broker in the business acquisition process. “As a franchisee and owner of multiple restaurants, I have experience in building out and operating eating establishments to full capacity,” he said recently. “Franchise brokers need to know how the business performs and why. They need to be assured their client’s investment in your business will be rewarded with a healthy return, or they’re less likely to introduce prospective buyers to your business opportunity.”
There are a number of benefits to working with a franchise broker. The first and most obvious of these is ease of use. Professional, experienced brokers do the heavy lifting, finding opportunities in your niche that hold promise. They point out which opportunities pose unhealthy risk and can save additional time and money during the research process. Franchise brokers are not paid unless you successfully identify and secure a franchise.
In addition, franchise brokers are excellent resources for buyers looking to get into business for the first time. A good broker will be invested in your success and spend time looking for ways to help refine your approach. They are invaluable tools for first-time buyers.
When initially working with a franchise broker, you should seek out someone who has plenty of experience, preferably within a team-based broker environment. Independent brokers are often unverified, making it difficult to gauge both experience and technique.
- Franchise brokers often work with more than one franchisor. Some companies work with more than 50 franchisors at a time.
- A small percent of franchisors in the business choose to use franchise consultants to source their brand.
- The same franchise brokers often work with the same franchises and vice versa.
Not all franchise brokers deserve your time and money. In some cases, it is best to avoid franchise brokers altogether. Certain independents may exhibit warning signs or red flags that should alert you to potential problems. Pushy brokers or brokers trying to force you into buying more than one property are an immediate red flag. Another warning sign is a lack of publicly documented experience. Some brokers refuse to make their history known, and if they are particularly closed off about their work, you may want to reconsider your partnership.
It is best to work with one franchise broker at a time. Building a strong relationship with a broker is a great way to find franchises in your niche. Best of all, it prevents you from being stretched too thin or taken advantage of by unscrupulous brokers.
Newer franchise investors may prefer to work with an older or more established brand. This franchise could have lower entry costs or be simpler to manage for an owner with less experience. Because franchise brokers have access to dozens of different brands and brand representatives, these individuals could help secure a business that’s right for you. Secure your long-term investment with the right franchise broker, and reap the rewards from the relationship as the deal progresses.
