Franchise consulting

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'Franchise consulting' traditionally meant the same consultant-to-client relationship as any other industry wherein the consultant charges a 'fee for services'. But, as of the late 1990s the term 'consultant' has been adopted by many franchise salesmen and brokers who represent themselves as 'free' consultants to prospective franchise buyers. These franchise brokers provide introduction services for franchise sellers with whom they have worked out a pay-for-sale agreement.

Some franchise consultants charge clients an upfront or ongoing fee for finding and analyzing franchises to buy regardless of compensation from the franchisor.

Franchise development consultants assist businesses in becoming a franchisor. They also might support with improving operations, marketing and sales of existing franchise systems.

For Franchise Buyers[edit]

Franchise Broker (paid by seller)[edit]

Much like a real estate agent, a franchise broker typically charges no upfront fees to "buyers" (franchisees); instead, he or she receives the bulk of his or her income from "sellers" (franchisors).

The role of the franchise broker is to build a win-win relationship between the franchisor and the potential franchisee. There are numerous franchise consulting firms that have a large footprint in the franchising industry and have referral agreement set up with 400+ franchises. Franchise brokers receive a commission of up to 50% or more of the franchise fee the buyer pays to the franchise company.

The potential buyer would pay exactly the same franchise fee as he or she would pay if they had contacted the same franchise on their own. It is illegal for the franchisor to charge anything additional for the use of a Franchise Consultant, unless this is disclosed in the Franchise Disclosure Document (FDD).

Franchise brokers often screen out under qualified candidates and only introduce to franchisors screened candidates that fit their business model. Many franchises are not concerned with paying the consultant/ broker a percentage of the initial franchise fee because they are looking at the long term residual value of on-going royalties from the franchisee.

Franchise Consultant (paid by buyer)[edit]

There are franchise consultants who charge an upfront or ongoing fee from prospective franchise buyers. Instead of working only with franchises that pay high placement fees, they advise the franchise buyer on any franchise publicly available. As of April 2021, there are over 2,000 franchises being offered in the United States alone. Many popular franchises like Chick-fil-A do not work with franchise brokers and can cost as little as $5,000 for the franchise buyer (Chick-Fil-A corporate covers the difference for opening a store which can be over $2,000,000). Other franchises like Papa John's, Subway, IHOP and Jimmy John's do not compensate franchise brokers from the franchise fee. Business brokers may be compensated on franchise resales by the franchisee selling his/ her location but generally not by the franchisor who collects a transfer fee from the seller.

Franchise Attorney (paid by buyer)[edit]

There are many licensed franchise attorneys who will consult/represent the franchisee or the franchisor under a fee agreement. Attorneys cannot take fees from franchisors and consult with the franchisee at the same time because this would represent a conflict of interest for an attorney under state laws. A consultant package from an attorney will, of course, be expensive, but the attorney has the incentive and the duty under the law to "vet" the franchisor and perform "due diligence" on the offering on behalf of his/her client when he/she offers a consultant package to a client.

For Franchisors[edit]

Franchise Consulting Firms[edit]

Smaller and more pragmatic consultancy practices may work much closer with smaller businesses to franchise their business over time. This enables the business to begin franchising their business much sooner, often within 2 years of successful operation of a local model.

Services provided for new franchisors might include:

  • Franchise legal documentation (generally in conjunction with a licensed franchise attorney)
  • Franchise operatorios and training support
  • Franchise sales material
  • Franchise sales training
  • Website development
  • Online marketing for franchise buyers
  • Online marketing for end consumers
  • Franchise compliance training

Franchise consultants might also provide services to existing franchise systems that are looking to expand and improve operational efficiencies. Further services provided to these franchisors include:

  • Franchise marketing material
  • Franchise sales coaching (to franchise brokers and internal salesmen employed by franchisor)
  • Operation manuals
  • Strategizing on best utilization and implementation of money from the advertising fund
  • International expansion

See also[edit]

References[edit]