Joel Libava
There are thousands of franchise consultants around. But what do they do?
Who are they?
How are they paid…and how much?
In this comprehensive guide, I’m going to teach you everything you need to know about franchise consultants and franchise consulting companies. Now here comes the good part.
What you’re about to read is based on my own experience as a franchise consultant.
With this in mind, I want to make sure you know who this article is for.
This Article Is For Prospective Franchise Buyers
If you’re thinking about using a franchising consultant from a franchise consulting firm-which according to the Franchise Rule is a “franchise seller,” to help you find a franchise to buy, it’s crucial for you to know how they work, how they get paid, and how they may or may not be able to help you find a good franchise to own.
My promise to you:
If you take the time to to read this guide, you’ll be a much smarter and informed franchise buyer. Especially if you decide to work with a franchise consultant, franchise broker of franchise “coach.”
In particular, I’m going to share facts about franchise consultants along with a few secrets* that will save you loads of time, lots of potential headaches, and maybe even your life’s savings. (Really)
And if you’re working with a franchise consultant right now, ditto. These tips (and secrets) will benefit you tremendously.
*The consulting secrets I’m about to share probably aren’t going to win me any popularity contests with any of the 3500+ people who run their own franchise consulting companies and peddle franchises for sale these days.
But everybody (you included) ought to know about franchising consultants.
Bottom Line?
If you’re searching for a franchise, you’re almost certainly going to come across at least one franchise consultant, franchise broker, or franchise coach. Wouldn’t you like to know how they work before you decide to work with one?
Let’s dive right in.
What The Ultimate Guide To Franchise Consultants And Franchise Consulting Services Includes
Never before have so many details about what franchise consultants do-and the facts about how they do their franchise consulting, been brought out into the open.
Not only have (some) of the things I’ve included in this article never been talked about; they’ve never been brought up by someone who actually used to be a franchise consultant.
What’s Included In This Ultimate Guide:
- An explanation of “what is a franchise consultant?”
- What does a franchise consultant do?
- Information about other titles franchise business consultants (franchise sellers) have, so you know who’s who-and what’s what
- The most important document a franchising consultant possesses
- How their franchise consultancy works
- How they’re paid, including the eye-opening fees they get
- What to expect during a typical “consultation“
- How consultants sell franchises
- Secrets that today’s franchising consultants don’t want you to know
- How to evaluate a franchise consultant
- What happens when you work with a franchising consultant
- How does a franchise consulting business make money?
- How to deal with a consultant’s paranoia
And, much, much more.
Special Bonus!
And as an added bonus, I’m going to teach you everything you need to know in a totally* professional, and extremely classy way.
*Wait. Hold your horses!
I’m going to attempt to educate you on this important topic in a professional, classy way. Because bluntly, there are numerous franchise consultants doing business who piss me off anger me because they kinda suck and are greedy bas*ards.
With that in mind, let’s see how long I can maintain my composure-starting now.
What Is A Franchise Consultant? What Does A Franchise Consultant Do?
The answers to those question get a little tricky. But in a nutshell, a franchise consultant is:
Someone who offers a free consulting service that matches people who are interested in possibly buying a franchise-to what the “consultant” thinks is the right franchise.
Accordingly, if the franchising business consultant successfully convinces their candidate to buy a franchise opportunity they’re contracted with, the franchisor pays that consultant a fee. A commission.
How Much Do Franchise Consultants Make?
The commissions range anywhere from $15,000 $20,000 up to $80,000 or more, with the average payday hovering around $22,000. More on that later.
$80,000? Yep.
Fee (Commision) Update
Here’s the latest example of the types of fees today’s franchising consultants are receiving.
From PR NewsWire/PR WEb:
“A new incentive announced by Threshold Brands pays franchise brokers/consultants/coaches a $30,000 referral fee on the first unit signed by a new candidate, a $40,000 referral fee for the second new franchisee, and a $50,000 referral fee when a third candidate signs an agreement. Each additional territory purchased by a new franchisee brings a $20,000 referral fee. This is valid for all brands under the Threshold Brands umbrella. However, the company is paying an increased referral fee of $50,000 for the first unit purchased by every new franchisee for USA Insulation, Sir Grout, Granite Garage Floors and Pestmaster.”
Franchise Consultants Are AKA
There’s something important that you ought to know about today’s franchising consultants. It’s this: franchise consultants have a couple of other titles they go by. They’re also known as:
- Franchise Brokers*
- Franchise Coaches
*A bit of history…
You may not know this, but franchise brokers started to become a “thing” in the late 1980’s. My dad, Jerry Libava, was one of the first franchise brokers in the country.
(That’s my late father, Jerry Libava, hanging with my daughter Grace, in 1998 or so.)
Anyway…
About The Word, “Broker”
Some of these early franchise brokers (my father included), felt the word “broker” had too many negative connotations to it. So, the word “consultant” was eventually substituted-and it’s pretty much the term used these days. So, a franchise “consultant” is really a franchise broker. And what is a broker?
The definition:
“A broker is an individual person who arranges transactions between a buyer and a seller for a commission when the deal is executed.”
In other words, a broker is someone who “brokers” a deal between two parties-and gets paid a fee for doing so. For “consulting.” Like a franchise broker.
To reiterate, a franchise consultant is a franchise broker. A franchise broker. It’s someone who receives a commission for brokering a deal between their candidate* and one of the franchisors they work with as part of their franchise consultancy business.
*The word “candidate” is used to describe the person who’s receiving free franchise “consulting” from the franchise consultant.
“Joel, why isn’t that person just called a ‘client?‘”
Great question. I’ll explain why in a bit.
A Quick Update
Before I continue, I need to tell you about a new name someone in the brokerage industry has come up with. You ready?
An Executive Franchise Specialist.
What does that mean?
Does the person calling himself that think that by inserting the word “executive” into the mix, he’s going to be able to sell more franchises?
Would you work with an Executive Franchise Specialist?
Let’s continue before I go off on a tangent I can’t stop…
Franchise “Coaches?”
I need to share this.
It’s important I do, because words mean a lot. (In this case, words that some franchising consultants use.)
If you guessed that a franchise coach is a franchise consultant-in other words, a franchise broker, you’re 100% correct. But why do they call themselves “coaches?”
My thinking is that some of today’s franchising consultants feel the word “coach” sounds even better than “consultant.” I guess it does. Kind of. Maybe. Heck. I don’t know!
It’s Time For A Franchise Coaching Reality Check
Here the deal.
Using the word “coach” to describe what a broker/consultant does is just plain, old-fashioned marketing.
If you’d like to see exactly what I mean, this article is well-worth a read. (It’s not very popular with franchise coaches.)
But don’t get hung-up on the words…the titles they call themselves.
That’s because in the final analysis, a franchise consultant or a franchise coach is a really a franchise broker.
And all of them own a franchise consulting business and get paid in the same fashion for doing their consulting: byCommi$$ion.
Got it?
Next, it’s onto the franchise consulting contract. The contract-their contracts, can really impact you if you decide to work with someone who’s part of a franchise consultancy.
About The Contract
When I say “contract,” I’m talking about a legal document that must be signed by both the franchise consultant (or the franchise consultancy) and the franchisor. Like the one below, for example.
Franchise Consultants: Their Franchise Sellers Referral Agreement
Here’s what a franchise consultant/franchise consulting agreement looks like:
This referral agreement dated 1/2/07 between FSS Inc., an Ohio corporation, and Roberts Franchising, Inc., spells out the entire business arrangement between the two parties named above.
FSS is in the business of matching (consulting) qualified candidates to franchise and business opportunities. FSS is not an agent or is in any sales capacity for these companies. FSS pre-qualifies its clients and then sends the appropriate information either electronically, regular mail, or via facsimile to the companies that it is a referral source for. FSS does not provide marketing, franchise sales, or promotional literature or electronic information from the companies it works with to its clients {candidates}. That is the responsibility of the franchise or business opportunity companies. FSS is completely independent, and is free to work with any franchise or business opportunity it chooses to. The franchise or business opportunity company named above will initiate the first contact with candidate, after FSS sends appropriate candidate information to said company. When the company named above enters into an agreement with a FSS referred candidate, within 2 years of the date of referral by FSS, and company named above has received its required non-refundable franchise fees from that referred candidate, payment of the referral fee in the amount of $18,000 or 40% of the Franchise Fee, whichever is GREATER, is due within 7 business days of receipt by above company. A late charge of Five Percent {5%} per week will be collected by FSS from company named above after the 7 business day period. FSS can use any legal remedy to collect referral fees due, including but not limited to collection proceedings, and formal legal measures with franchise or business opportunity company named above responsible for any such costs borne by FSS for said collection of fees due. This constitutes the entire franchise sales agreement.
FSS Inc. And Roberts Franchising LLC
Sig._____________________ Sig.__________________
Date_____ Date______
$$$$$$$$$$$$$$$$$$$$$$$$$$$
Do You Need To Read That Franchise Consulting Contract One More Time?
Now, you’re more than welcome to read that 1-page consultant-consulting contract again-but it’s not necessary.
Because in short, this is what the contract above states:
“Roberts Franchising Inc. (the franchisor) agrees to pay FSS (the franchise consultant) the sum of $18,000 when a candidate FSS refers signs our franchise agreement and pays the required franchise fee.”
Which leads us to the next section.
(You Won’t Believe) How Franchise Business Consultant Fees/Commissions Are Calculated
Franchisors typically pay franchise consultants a percentage of the upfront franchise fee. As a rule, that percentage is 40-50%.
So, if the franchise fee is $50,000, and the franchisor is paying a franchise consultant a 40% commission, the consultant receives a check for $20,000. And he gets it via FedEx about a week after his candidate sends in the check for the franchise fee. Not a bad day’s work, eh?
And if a franchise consultant gets lucky-real lucky, and matches someone to a Master Franchise-in which their candidate purchases an entire region, it’s almost like winning the freaking lottery. Because the franchise fee could be $200,000-or more, earning the consultant an $80,000 commission. For a franchise consultant, it’s like winning the lottery.
Now you know why franchise consultants offer their “franchise matching” services for free.
But remember; in order for them to make a franchise sales commission when they work with you, again, they need to have a signed franchising consulting contract with the franchisor.
Because…
No Consulting Contract = No Check
It’s important to know that today’s franchise consultants who are part of a franchise consulting group have an entire file of contracts similar to the one I showed you above. They’re always kept in a fireproof box in a safe place, because the (signed) contracts they have on file are the most important part of their business.
To put it another way, if a franchise consultant doesn’t have a signed contract, they won’t receive their $20,000 commission checks for matching people like you to a franchise opportunity they represent. One more thing…and it’s important.
If you’re thinking of using a franchise broker/franchise consultant/franchise coach, you need to understand that the only franchise opportunities you’ll ever be presented with are the ones the franchise consultant/franchise consulting company has a signed contract with.
“But Joel, I’m working with a franchise consultant, and she told me that she’d be more than happy to let me know if she run’s across any other franchise opportunities that may be a fit-even if she doesn’t work with the company.”
No. She. Won’t.
“But, Joel, ….“
To put it differently, your franchise consultant may be the nicest person west of the St. Louis Arch, and maybe even be somewhat of an expert, but she ain’t gonna offer “Free Franchise Consulting” to you for nothing.
(I’m trying people. I’m really trying to not go off the rails here.)
I Am Not A Franchise Consultant.Instead, I’m a Franchise Ownership Advisor. Big difference. The most important difference?
I don’t get paid brokerage commissions by franchisors.
That said, can you think of a reason NOT to Schedule A Complimentary Call with me?
What Is The Franchise Consultant Business Model?
Before you decide whether or not you’re going to work with a franchise consultant, it’s super-important to know how their business model works.
That’s because the way they work-and how they’re compensated, will affect your life. (If you buy a franchise they matched you to.)
With this in mind, it’s time for me to bring up the “F” word.
But, it’s not the “F”word you’re thinking of.
It’s this word.
That’s right. “Free.” As in, franchising consultants offer their services for free. But why?
Because their business model depends on it. I’ll explain.
To begin with, everybody likes “free.”
Whether it’s free soft drink refills at a restaurant, a free car wash after a few fill-ups, or free wi-fi at an airport, we like and welcome (with open arms) free stuff.
Agreed? Good.
The Model
Now, let’s get back to the consultant model…the “free” part. Take a look at this:
Free Franchise Consultations
Our network of franchise consultants will help you find the right franchise
Call Now! 1-800-555-0000
Free Consulting Services!
If you’ve been looking online for a franchise to buy for a while, you may have run across an advertisement like the one above-or something similar.
An ad for a “Free Franchise Consultation” is one way for a franchise consultant to get prospective candidates to call or email. (If you remember, a “candidate” is the person the consultant is providing free matchmaking services to. You?)
In a Nutshell…
“Free Franchising Consultations” are not consultations. They’re sales calls.
Simply put, every “Free Consultation” is designed to move you towards a franchise the “consultant or “coach” represents, so the consultant can get paid his or her $20,000 commission from the franchisor.
Kinda harsh I know. But it’s true.
Franchise “Candidates”
This short section may be the most important one of all. I strongly suggest you read every word for maximum benefit. Here goes.
If you decide to use the free services offered by a franchise consultantcy to “match” you to a franchise, you’re referred to as a “candidate.”
You’re not referred to as a “client.”
Would you like to know why?
(Drum roll please)
Because The Franchisor Is The Client
And that means you’re not.
This is worth repeating.
When you work with a franchise consultant who’s offering his consulting services for “free,” you are not his client.
The franchisor is.
Lastly, there’s one more thing you need to know.
Part of their pitch to you is that they’re “intermediaries.” They’re not. They’re franchise sellers. And I have proof.
The Definition Of A Franchise Broker (Consultant/Coach) From The Federal Trade Commission:
“Even if they do not actually negotiate, sign contracts, or accept money on behalf of individual franchise systems, they nonetheless ‘arrange for the sale of a franchise’ by introducing prospective franchisees to specific franchise concepts and by putting prospective franchisees in contact with specific franchisors. Moreover, they are paid by the franchisor if a sale is ultimately consummated. That is all that is required to constitute a ‘broker’ under the Rule.”
See?
‘We Have Vetted The Franchise Systems We Represent’
What does that mean…”vetted“?
Here’s the definition of vetted-courtesy of Merrium-Webster:
“Having been subjected to evaluation or appraisal : critically reviewed and evaluated for official approval or acceptance.”
That sounds great!
But again, what does that mean?
What criteria is used?
Who’s doing the vetting?
Finally, since the franchise opportunities your franchise consultant presents to you are “vetted,” that must mean that they are guaranteed to be top-quality franchise concepts, right?
After all, what good is offering only vetted franchises if their quality and profit potential….let’s call it success potential instead, isn’t guaranteed* by the franchise consultant and/or the franchise consulting company?
While you’re noodling that, I’m going to move on and talk about Bob.
*None of the franchise consulting companies guarantee the franchises they represent and who pay them big bucks. The “vetting” of franchise concepts and companies they do means nothing. But it sure sounds good.
Bob, The Franchising Consultant
“But Joel, Bob-my franchising consultant, is spending a lot of time with me. He sure talks to me like I’m his client.”
I know…I know.
“And I know that Bob really wants to help me become my own boss. He’s not pressuring me to buy anything, and he’s really taken the time to learn a lot about me and consult with me. I really like him, Joel.”
I understand, Bruce. I get it. But Bruce, who’s paying Bob?
“Well, the franchisors are, but I don’t care. I figure if Bob helps me find a good franchise to buy, it’s worth it. And he doesn’t charge me anything. It’s a free service“
Continued: The Franchise Consultant Business Model
So far, you’ve learned that franchise consultants offer their consulting (franchise matchmaking) services for free.
You’ve also learned that one way franchise consulting companies find candidates is by advertising-usually online.
Finally, you’ve learned that when you work with a franchising consultant, you’re not the client. (The franchisors she has contracts with are her clients.)
Next, I’m going to show you how a franchise consultant begins her career.
Joining A Franchise Consulting Group Or A Business Consultancy Franchise
First off, you need to know that today’s franchise consultants-in most cases, are part of a group of franchise consultants. Basically, this “group” is a franchising consulting company. That means that these days, independent (solo) franchise consultants are few and far between.
Franchise Consultant Training Fees
To become part of a franchise consulting group*, (also called a Franchise Broker Network ), an upfront investment to the group…the company…the “network“, is required. It’s for training…and for profit (for the organization).
*Let’s talk about Business Consultancy Franchise Opportunities.
Some franchise consultant companies are actually franchise organizations that are selling franchise consultant franchises. A few are sold as “Business Opportunities,” and there’s even one that’s an “Association.” But they all have one thing in common:
They charge anywhere from $20,000-$50,000+ upfront to people who want to become a franchising consultant. In addition, these organizations charge ongoing monthly fees for website maintenance and marketing etc.
What Do Consultants Get For Their Money
After a new franchise consultant pays her fee to the franchising consulting company, and signs the required Franchise Broker Network contract (which could be a franchise contract), she’s brought into the system and trained on how to be a franchise consultant.
This training includes:
- Learning about the franchise business
- Marketing-as in how to find candidates
- The legalities involved in franchising
- Sales-how to present and sell franchises
- An overview of the 100-150 franchise concepts the consultant is now contracted with, because she’s part of the group. A group that has 150+ franchisors in it’s portfolio.
When she’s finished with training (normally 3-4 days) she’s sent on her way. She’s now a franchise consultant.
At this point, all she needs now is a computer, internet access, a phone, and an email account. A home-office will do.
In addition, a pretty basic website will be setup for her. Now all she has to do is find prospective franchise owners. (Candidates)
But how?
Franchising Consultants Are Always Marketing To You
Franchise consultants have to ABM. (Always Be Marketing)
That’s because in general, they’re not going to be handed leads-names of people who are interested in checking out their free services. (Although some organizations do provide a few leads each month at no charge.) Anyway, as I said, they have to market. And marketing costs money.
Generally speaking, most of their marketing is focused on buying leads. These leads may even come from their own organization-which buys leads and then resells them to their consultants.
In addition, they may be able to purchase leads from several of the top franchise websites who will enthusiastically sell them to franchise consultants.
As a matter of fact, you may have filled out a web form on a franchise opportunity website yourself…without knowing that you’d be getting contacted by a franchise consultant offering to help you find a franchise-for free.
Regardless, buying leads is the main way today’s franchise consultants/firms find candidates. But there are other ways.
Franchise Business Shows
Have you ever attended a local “Franchise Show?”
I’m not talking about any of the big franchise shows that hit the major cities annually.
Instead, I’m referring to the smaller “Business Show’s” as they’re sometimes called.
These “shows” are put on by local franchise consultants-although you may not know it at first.
That’s because they’re marketed as an event that features “Franchisors who are interested in expanding in the area all gathered in one place.”
A Really Small Place
When you attend one of these events, you quickly find out that they’re really small. As a matter of fact, they usually only include of 4-6 franchisors.
These franchisors have tables setup with their brochures etc., and they get to go to the front of the room and formally present their franchise opportunities to the attendees. But that only happens after the franchise consultant who put on the event does a talk on all the benefits of franchising, including why attendees should consider working with him -for free- to find the franchise of their dreams. Etc. Etc. Etc.
“Checking In” To Their Shows
This part is kind of important.
As a rule, when you attend an event like this, you’ll be asked to “check in” before you’re allowed to proceed into the “show” area.
You’ll be asked for your full name, address, email address, and phone number. Would you like to know why?
Because if you end up buying one of the franchises that participated in the show, the franchise consultant wants to make sure he has a record of your attendance so he can get paid a commission. (Even if he never meets with you in-person or over the phone.)
So now you know about “Franchise Shows.” And why they’re put on.
Are You Feeling Me?
Now, just in case you don’t follow what I’m getting at, allow me to put it bluntly.
The local franchise shows that are put on by franchising consultants aren’t put together for your benefit.
They’re put together so the franchisors (who are the franchise consultant’s clients) can sell a franchise or two, and the franchise consultant and the franchise consulting company can get paid a commission (or two) for doing so. And sometimes, the franchisors in attendance even pitch in their own money to help pay for the room being used, and the advertising that got you there in the first place.
The bottom line (without going into detail about any other ways franchise consultants market their services) is that a lot of marketing is required to find people like you who are interested in buying a franchise.
Specifically, people who are open to the idea of working with someone they don’t know who wants to “help” them find a franchise to buy-for free.
(An example of an ad for free franchise consultations.)
Are Franchising Consultations Always Free?
For the most part, franchise consultants offer franchise consultations for free. However…
A few of them do try to squeeze a few hundred dollars (up front) out of unsuspecting prospective franchise owners. In other words, they charge people for consultations-even though they’re getting paid a large commission from the franchisors. It’s called double-dipping.
But these days, they’re finding it harder and harder to do.
That’s because of the internet, and the flood of information that’s readily available to consumers.
Like this updated “Consumer Guide To Buying A Franchise” from the Federal Trade Commission. (FTC)
In it you’ll find even more information on franchise consultants.
The bottom line is this: by and large, today’s consumers aren’t dumb. They know what they can get for free and what they have to pay for.
So, in the event you decide to work with a franchise consultant, remember that he’s already getting paid by a franchisor-if you buy a franchise he represents.
What Happens When You Work With A Franchise Consultant?
Now it’s time to see what happens when you actually work with a franchising consultant.
Why?
Because it’s important for you to know what you’ll experience if you decide to go this route.
In addition, the amount of money you may end up investing if you become the owner of a franchise business could be substantial.
With that in mind, what follows is the exact process that nearly every franchise consultant uses to match you to a franchise they represent.
Follow along, so you’ll know what you’re going to experience, step-by-step
The Initial Call
In order to get contacted by a franchise consultant, you probably:
- Filled out a form on a franchise or business-related website
- Attended a seminar or a franchise show
- Were referred to one
In any case, here’s what happens next.
Nine times out of ten, you’ll receive a welcome email from the franchise consultant. (Maybe even a phone call-followed by an email.)
When you get the welcome email, expect a “Thank you for contacting me” sentence, followed by:
- A brief biography* of the consultant
- An explanation of what he does
- Next steps
- A questionnaire
And maybe something else, like pointing you to an article that explains franchising. (That link goes to a franchise article I wrote for CNBC.com as part of my book launch. You should read it. )
*About the biography: Today’s franchise consultants don’t necessarily have a background in franchising. On the contrary, their professional backgrounds vary-a lot.
For example, a franchise consultant may have been a downsized corporate manager or executive who responded to a “Make Money Helping Entrepreneurs” type of advertisement.
Which leads us to this next part.
Should A Franchise Consultant Have A Franchise Background?
I don’t know about you, but if I was potentially investing $150,000 or more into a franchise business, and decided to use the services of a franchise “consultant,” I would certainly expect said consultant to be someone from the world of franchising.
Be that as it may, you need to know that if you end up working with a franchise consultant, there’s a chance that they don’t* have a background in franchising.
*Having said that, there are a lot of successful franchise consultants that did come from non-franchise industries.
And by successful, I mean they make a lot of money…as in $250,000, even $350,000 a year-or more!
Tip: Just because a franchise consultant has made a lot of franchise matches, which equals a lot of money made for her own pocket, it doesn’t mean that the candidates they placed are successful franchise owners. Heck, the candidates they placed into franchises may actually be out of business already and in a bad place, financially. It’s almost impossible to know. It’s not generally tracked very well.
The Consultant Questionnaire
The questionnaire you receive (via email) from your franchise consultant, is an important tool. For him.
That’s because the very personal things you’ll be asked to share with him are the very same things he’ll use to match you to franchise opportunities he gets paid on.
For the most part, the questionnaires in use today are good. They can really get you thinking about yourself, and the types of businesses you may want to look into.
In short, the questionnaire you’ll be asked to fill out will include questions about your employment history, your strengths and weaknesses, likes/dislikes, and most importantly, there will be a pretty detailed section that asks you to fill in information about your finances. Very specific things about your finances.
For instance, you’ll be asked what your net worth is, along with how much money you’d be willing to invest in a franchise-if you find the right one.
Tip: If you haven’t calculated your net worth, I have a free net worth calculator you can use anytime you want. Calculator
You’ll Need To Disclose Your Financial Information
Warning!
You may feel uncomfortable about revealing your finances.
If that’s the case, here’s what you can do to feel a little more comfortable about sharing your financial information with someone who is a total stranger.
Use Google, Bing or DuckDuckGo, and type in the name of your franchise consultant. See what comes up.
Then…and this suggestion is sure to piss off every franchise consultant in the United States, perform another internet search using the consultant’s name-but add the word “fraud” after it. (You can use the word “scam,” too.)
Again, see what comes up.
Bonus: Don’t be afraid to use the name of the franchise consultant’s organization* in your search, too.
*Most franchise consultants belong to some type of organization-and some of them are franchises themselves. Here are the names of some of the larger franchise consultant groups.
The Franchise Brokers Association
But why? Why do this?
To make sure the person you may be about to reveal specific financial information to is legit.
Franchise Fraud Free?
Now, in my experience, most franchise consultants are fraud-free. But just like in any industry, there are a few bad apples. So make sure you do a background check of the consultant before you start working with him. Just use your favorite search engine and use my ideas. You can even use some of the ideas contained in this Digital Trends article on how to run a totally-free background check.
Recommended Read: This Entrepreneur.com article about good/bad franchise consultants.
It’s Franchise Opportunity Matching Time!
This is when the fun begins.
It’s when you’re going to be “matched” to franchise opportunities that your consultant feels are right for you.
But, how does she figure out which franchises to present to you for possible matches?
Answer: By examining the answers you gave on the questionnaire she asked you to fill out. In particular, she’ll be looking at the following two things.
1. Your financial information. She needs to make sure you have enough* money to buy a franchise.
*In my world, people need to have a minimum net worth of $300,000. (I’m changing that amount to $350,000, because $300,000 doesn’t really cut it anymore.)
In addition, my experience tells me that at least $50,000 of your net worth must be liquid.
Important: Make sure you calculate your net worth correctly. (A lot of people mess up their calculations.)
2. Your personal traits/strengths
The questionnaire you fill out almost always includes a place for you to write down your:
- Business strengths
- Personal abilities
- Personal traits
Examples Of Personal Traits
For instance, you may be asked to look at a list of personal traits, and circle the ones you feel best describe you.
Like these:
- Outgoing
- Empathetic
- Principled
- Shrewd
- Intense
- Methodical
- Outspoken
- Agreeable
- Level-headed
- Punctual
- Ambitious
The reason you’re asked to reveal these things is so your franchise consultant can start formulating ideas on the types of franchises you may be a fit with.
The same is true for what you reveal your business strengths to be.
Examples of Business Strengths
The things you’re good at, business-wise, can help determine the types of franchise opportunities you should be investigating. That’s why there’s going to be a spot on the questionnaire for you to share what you’re good at in business.
Look at this list:
- Operations
- Employee management
- Sales
- Marketing
- Strategy
Are you highly-skilled at any of those things?
In addition, you may be asked what your best personal abilities are.
(For example, are you good at building things, writing, acting etc.)
Other Items
Aside from your consultant looking at your financial qualifications, personal traits and business skills, there are a few more items she’ll be looking at.
For example, one of the things included in the questionnaire is an area to fill out your job history. (Kind of like when you apply for a new job.)
It’s there because she wants to see what your roles and responsibilities have been, so she can present the right franchises to you. Let me show you what I mean.
The Scenario
Let’s say you’re an accountant who was was recently let go fired from an Inc 5000 company.
You’re role had to do with auditing and taxes. You had your own office, and were pretty much on your own with no employees under you.
A good franchise consultant would not present you with a franchise opportunity that needed 35 full-time employees. (Because you don’t have supervisory experience.) But, an average or below-average franchise consultant might.
Honey?
Another thing your consultant will want to know has to do with your immediate family. Specifically, “Is your spouse/significant other supportive of your idea?”
Tip: If your significant other/spouse/partner is not fully on-board with your idea of becoming your own boss through franchising, you’re going to have to seriously up your sales game.
Read, “Honey, I’m Thinking Of Buying A Franchise,” to see what I mean and to have a chuckle.
Your Time-Frame
Another thing your franchise consultant will look at is your time-frame for getting into business.
I guarantee there will be a question on the questionnaire that asks when you’d like to buy a franchise. It will look like this.
How Soon Would You Like To Be In Business?
(Check One)
Within 3 months
Within 6 months
Within 12 months
(Obviously, you couldn’t literally “check one” above. But, on the questionnaire you can.)
Hot. Warm. Not.
From a franchise consultants’ point of view, if you checked “within 3 months,” you’re considered a “hot” candidate. She’ll focus most of her energy on you, since in her mind you’re ready to buy a franchise.
If you checked “within 6 months,” you’re a “warm” candidate. Your consultant will put a good amount of energy towards you-but only if you’re showing enough interest in the franchise opportunities she’s presented you.
If you’re looking to buy a franchise “within 12 months,” she may try to talk you out of not working with her.
That’s because in the world of franchise consulting, you’re not considered a good candidate.
What you are considered is a “tire-kicker.” That means you’re “curious” enough about franchising to “look at a few franchises,” but you’re probably not at the stage where you are serious (yet) about investing money in a business.
To put it bluntly, when someone works on a 100% commission basis, they’re only going to spend time with people who they feel can make them money.
So, in this case, if your time-frame for getting into business is too far in the future, you should just search for franchise opportunities on your own.
To summarize, your franchise consultant will be taking a deep-dive into the answers you gave on the questionnaire. It realy is a powerful tool for them, because in their eyes-it helps them qualify you or disqualify you. It helps them decide if it’s worth their time to work with you or not.
Because time is money.
The Franchise Matching Phone Call
As long as your franchise consultant feels you’re qualified-financially, along with some or most of the other things I shared with you, he’ll schedule the next phone call.
During this call, he’ll discuss the answers you gave on the questionnaire, and explain how his process works.
Then he’ll present a few* franchise opportunities he feels are a good fit for you.
*I’m not sure why this is, but 9 times out of 10, you’ll be presented with exactly 3 franchise opportunities.
Franchise Consultant Secret #1:
The franchise opportunities he presents to you were probably picked out well before this call. He already knows how much money you have, what you’re good at, along with other assorted things you shared. It’s all part of his plan. Which is:
To match you to a franchise he can get paid a commission on.
But know this: He can always come up with other franchises spur of the moment, especially if you’ve said no to the 3 franchises he presented. And good franchise brokers know how to adapt to what you say you want in a business-as they should. 
Franchise Consultant Secret #2:
One way franchise consultants entice you into working with them is by throwing big numbers at you.
In this case, I’m referring to the number of franchises they work with.
200 Different Franchise Opportunities
“Maureen, not only are my services free, but when you work with me you have a lot of choices. That’s because I work with over 200 different franchisors!”
Important: There are 3,500+ different franchise opportunities offered. A franchise consultant works with less than 10% of them!
On the surface, this sounds great to Maureen-the candidate. But in reality, 9 times out of 10, a franchise consultant only presents 15-20 opportunities out of the 100-200 he has formal contracts with.
“But why would a franchise consultant only focus on a small number of franchises, Joel? It makes no sense.”
Sure it does. That’s because today’s franchise consultants are trained to have a list of “go-to” franchise opportunities at the ready.
Basically, they’re instructed to memorize the details of 15-20 franchise opportunities…to get to know 20 franchise opportunities really, really well.
Because once they have those 20 or so franchises down pat, they can present them in the best light…make them sound very attractive.
Attractive enough for you to agree to get contacted by the franchise sales team at franchise headquarters.
Note: The top franchise consultants have a good knowledge of every brand they represent. They don’t work with a short list…as described above. So if you’re going to work with a franchise broker, pick a good one!
The Sectors In Franchising
In addition, they’re taught to choose a few franchise businesses from each franchise sector.
For example, 3 retail franchise opportunities, 3 home services franchises, 2 fitness franchises, 3 senior care franchises, and so on (which is not how I worked when I was a franchising consultant).
In addition, they’re trained to have franchises available that have low, medium, and higher investments-if possible. That way no matter what their candidate’s financial situation is, they’ll have franchise opportunities to offer them.
Are You Interested In Any Of The Franchises Presented?
After your consultant has presented 3 franchises, he’ll ask you if you’re interested in any of them. If so, he’ll suggest that you agree to getting contacted by someone from franchise headquarters to “learn more.”
Your possible answers:
“Yes, I’m interested in learning more about 1-800-Blah-Blah Blah, but the other two aren’t doing it for me.”
To
“I definitely want to know more about 1-800-Blah-Blah-Blah, and The Cleanup Pros. Please tell them to call me“
To
“No, I’m not interested in any of the franchises you recommended. What other ones can you show me?”
The Next Step
If you’re interested in one or more of the franchises he presented, your consultant will send your information over to the franchisor, and he’ll give you the name of the person from franchise headquarters who’ll be calling you.* In most cases, this person’s title will be Franchise Development Representative, or Director of Franchise Development.
Tip: You need to know that whatever the title of the person you’ll be working with at franchise headquarters is, he or she is a salesperson. And guess what? This person is also getting paid a commission if you buy the franchise.
*Important: When you work with a franchise consultant, you’re not allowed to contact the franchisors directly. Instead, the franchisors must contact you. Why?
Because in order for the franchise consultant to get paid for referring you to a particular franchise, he needs to officially “register” you with them. In other words, there must be proof that he referred you to them. (A paper trail.)
Franchise Consultants Are VERY Paranoid
I’m not kidding. They are.
If you tell your franchise consultant something like this: “Bob, I want to think about your ideas for a few days, and then I’ll just call the franchisors myself if I’m interested,” expect to get serious resistance from Bob (your franchise consultant).
That’s because Bob is a very paranoid guy. He’s been taught to always be fearful of candidates who attempt to go around him and contact his franchisors themselves. He knows if that happens, and a candidate buys a franchise the consultant represents, he won’t get a commission check. And that would make Bob very angry.
Franchise Consultant Secret #3:
A lot of franchise consultants register their candidates with every franchise they presented to them, regardless of whether their candidate showed no interest. Consultants do this to protect themselves. However, doing so can lead to problems.
One Example Of What I’m Talking About
What if you (his candidate) ended up getting an email or a phone call from a franchisor you’re not interested in hearing from.
Now, in most cases, this doesn’t happen on purpose. It’s simply a breakdown in communications. (Or in Led Zeppelin speak, a “Communication Breakdown.”)
What sometimes happens is franchise headquarters receives your contact information from the consultant, and the franchise development department gets a ping. So they contact you.
If that ever happens to you, just tell them it was a mistake, and if you decide you’d like to learn more about their franchise opportunity in the future, you’ll let them know.
Now, let’s get back to the topic at hand; your non-interest in the franchises you’ve been presented with.
When Your Franchise Consultant Presents Franchises You Don’t Like
Just because a franchise consultant presents franchise opportunities he feels are good ones for you, it doesn’t necessarily mean they are.
Remember: This is your money we’re talking about. It’s your life. Your future. This isn’t the time to say “Yes I’m interested” in a franchise opportunity he recommends if you’re not. Please tell him you’re not interested in his idea-or ideas. Your consultant will get over it. Really.
In other words, if you decide to work with a franchise consultant, go in with an open mind…but don’t agree to get contacted by representatives of franchise opportunities you’re not in the least bit interested in. Let’s continue…
If you’re not interested in any of the franchises he presented, one of these things usually happens:
- Your franchise consultant will suggest another franchise or two.
- You’ll mutually decide to take a breather and have another conversation in a few days.
- You’ll end things with him-because of your disappointment, and try to find the right franchise opportunity on your own.
Let’s talk about #3.
Don’t Mess With Franchise Consultant Paydays
Generally speaking, today’s franchise consultants are fairly reasonable…and pretty professional.
That is until you mess with their generous paydays.
As an example, let’s say the franchise consultant in question just spent an hour and a half with you. (For free.)
In your case, she presented 5 different franchise opportunities to you. (Let’s make it 6, because she came up with a last-minute idea.) But the thing is, you liked exactly none of them.
As a result, you decided (in your own mind) to start looking at franchise opportunities on your own, since your consultant couldn’t come up with any good ideas for you. (You figure you had nothing to lose since her services were free, anyway.)
So, after you share your dissatisfaction with her, you’ll probably hear something like this:
“I’m sorry you weren’t interested in any of the franchises I showed you. Maybe your expectations are unrealistic. I’ve found that some of my candidates think they’ll hear about some kind of perfect franchise opportunity from me-and they’ll be super-excited to get more information from the franchise rep. But, it usually doesn’t happen that way”
Or
“Maybe we need to go back to the drawing board, and begin the process again.”
Or
“Maybe a franchise isn’t a good idea for you after all.”
That last one is called a “takeaway.”
A takeaway is a sales technique in which the salesperson “takes away” the product or service that was presented in order to get a reaction from the potential buyer. In this case the buyer-you, may say something like:
“No, no…I’m still interested in finding a franchise to buy. I just can’t get excited about the ones you showed me.”
If you say that, your consultant will definitely start coming up with more franchise opportunities for you to consider. Because $$ commission.
See how that works?
Finally, just because you’ve decided to work with a franchise consultant, it doesn’t mean that you can’t look at other franchise opportunities on your own. After all, it’s your money you’re thinking of investing.
The Next Calls With The Franchise Consultant
In contrast, let’s say you liked two of the franchise opportunities you were presented with, and you’ve agreed to get contacted by the franchise reps.
Let’s also say that the conversation (or conversations) you’ve had with those two franchise development reps went well, and they’ve laid laid down what the next steps in the process are going to be. These steps may include:
- A webinar to attend
- Receiving the Franchise Disclosure Document (FDD)
- Participation in a conference call with franchisees
- Weekly Q & A calls (with your franchise rep)
- Financing options
- Franchisee calls (you’ll be making those)
- Discovery Day invite
- Franchise contract
- Decision Day
It’s a lot, I know.
But, if you do these things one step at a time, and you’ve been gaining knowledge along the way, you’ll be in an excellent position to make a yes or no decision on the franchise opportunity you ultimately want to invest in.
Persuasion
At this point in the process, you’re getting close to making a yes or no decision on the franchise you’ve been investigating. That’s why the next few calls you have with your franchise consultant will be one’s of persuasion.
To put it differently, your consultant will be attempting to persuade you to buy the franchise you’ve chosen.
Now, some franchise consultants do this gently, and some will put you on the spot.
I’ve found that the way they do it it depends on a couple of things:
A. The franchise consultants’ personality.
If your consultant is laid-back, and has given you a lot of latitude during the process, he’ll be gentle in his persuasion techniques.
On the other hand, if she has an aggressive personality, and has been putting a lot of expectations on you during the process, i.e. really trying to control it, she’s going to go in for the close, hard. She’s going to press you to make a decision, and she’s not going to let things stay in limbo for very long.
B. Your geographical area.
How is business transacted in your area?
As an example, let’s say you live in New Jersey, and your franchise consultant was born and raised there.
If that’s the case, you know that business transactions are done in a very intense, aggressive way.
Based on that fact, your franchise consultant is going to try to get you to buy the franchise you’re interested in a way that’s not even a cousin of “subtle.” And he’s going to follow-up a lot when you’re in decision-mode. In other words, you won’t be left dangling-if you get my drift.
In contrast, if you live in Montana or Idaho, the opposite may be true.
Your franchise consultant will (generally) give you a lot of rope. She won’t push real hard, and the process will be allowed to take its natural course.
In other words, she’s not going to try to close you on the franchise opportunity she wants to get paid on too hard.
Probably.
Did You Learn A Few Things About Franchise Consultants?
I hope you found “The Ultimate Guide To Franchise Consultants” helpful.
In short, working with a franchise consultant is one way to go about finding a franchise to own.
As long as you remember who their client is.
Finally, if you’d like to how I work, here’s some information on my personalized and Guaranteed Franchise Ownership Advisory Services.
Franchise Consultants FAQ’s
Franchise Consultants, also called Franchise Brokers, work with potential franchise owners, helping them choose a franchise to buy. If they make a successful match, they get paid a generous commission for the franchisor they’re contracted with.
Franchise Consultants earn extremely large commissions if they successfully place someone they are working with into a franchise opportunity they represent. That’s why they work with potential franchisees for free. Like any sales position, it’s a numbers game; the more people Franchise Consultants work with, the better their chances are of selling a franchise.
On average, Franchise Consultants make $20,000 every time they successfully place someone into a franchise they represent.
Image of the arch courtesy of Bev Sykes, on Flickr.
Image of lottery winner courtesy of Vimeo
