What You Need To Know About Franchise Consultants Before You Work With One
Photo by KOBU Agency
Originally Posted On: https://www.thefranchiseking.com/what-everybody-ought-to-know-about-franchise-consultants
If you’re thinking about working with a franchise consultant, you need to read this post, because I’m going to tell you everything you need to know about what franchise consultants do and how they work.
In particular, I’m going to share a boatload of tips along with a few secrets* that will save you loads of time, lots of potential headaches, and maybe even your life’s savings.
And if you’re working with a franchise consultant right now, ditto. These tips (and secrets) will benefit you tremendously.
*The secrets I’m about to share probably aren’t going to win me any popularity contests with any of the 2000+ franchising consultants who peddle franchises these days.
But everybody (you included) ought to know about franchise consultants.
Because if you’re on the hunt for a franchise, you’re probably going to come across at least one franchise consultant. And you need the facts.
What This Comprehensive Article On Franchise Consultants Includes
Never before have so many details about what franchise consultants do-and the facts about how they do it, 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 (2-Part) Article:
- An explanation of what a franchise consultant does
- Information about other titles franchise consultants have, so you know who’s who-and what’s what
- The most important document a franchise consultant possesses
- How their business model works
- How they’re paid-Franchise Consultant fees
- What to expect during a typical “consultation“
- How consultants sell franchises
- Secrets that today’s franchise consultants don’t want you to know
- How to evaluate a franchise consultant
And, much, much more.
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 topic in a professional, classy way. Because bluntly, there are franchise consultants doing business who piss me off anger me because they kinda suck.
With that in mind, let’s see how long I can maintain my composure-starting now.
What Is A Franchise Consultant?
The answer to that question gets a little tricky. But in a nutshell, a franchise consultant is:
Someone who offers a free service that matches people who are interested in possibly buying a franchise-to what the “consultant” thinks is the right franchise.
Accordingly, if the franchise consultant successfully convinces their candidate to buy a franchise opportunity they’re contracted with, the franchisor pays that franchise consultant a fee. A commission.
$$$$$
The commissions range anywhere from $15,000 up to $80,000 or more. More on that later.
$80,000?
Franchise Consultants Are AKA
There’s something important that you ought to know about today’s franchise 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…
More On Franchise Brokers
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.
So, to reiterate, a franchise consultant is a 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.
*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.
Franchise “Coaches?”
I need to go here. It’s important, because words mean a lot. (In this case, words that franchise 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 franchise consultants feel the word “coach” sounds even better than “consultant.” I guess it does. Kind of. Maybe. Heck. I don’t know!
A Reality Check: 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 a very popular one with franchise coaches.)
But don’t get hung-up on the words…the titles they call themselves.
In the final analysis, a franchise consultant or a franchise coach is a franchise broker.
And all of them get paid in the same fashion: By Commi$$ion.
Got it?
Next, it’s onto the contract. The contract-their contracts, can really impact you if you decide to work with a franchise consultant.
About The Contract
When I say “contract,” I’m talking about a legal document that must be signed by both the franchise consultant and the franchisor. Like this one, for example:
Franchise Consultants: Their Referral Agreement
This referral agreement dated 1/2/07 between FSS Inc., an Ohio corporation, and Jay’s Franchising, Inc., spells out the entire business arrangement between the two parties named above.
FSS is in the business of matching 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, 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 agreement.
FSS Inc. And Jay’s Franchising LLC
Sig._____________________ Sig.__________________
Date_____ Date______
$$$$$$$$$$$$$$$$$$$$$$$$$$$
Now, you’re more than welcome to read that 1-page consultant contract again-but it’s not necessary.
Because in short, this is what the contract above states:
“Jay’s Franchising Inc. (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.
How Franchise 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.
Now you know why franchise consultants offer their “franchise matching” services for free.
But, in order to make a commission on you, again, they have to have a signed contract with the franchisor.
Because…
No Contract = No Check
It’s important to know that today’s franchise consultants 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 decide to work with a franchise consultant, the only franchise opportunities you’ll ever be shown are the ones the consultant 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, 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.)
Recommended Reading: The 7 Ugly Truths About Franchise Consultants
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, franchise 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.
Now, let’s get back to the franchise consultant model…the “free” part. Look:
Free Franchise Consultations
Our network of franchise consultants will help you find the right franchise
Call Now! 1-800-555-0000
Free Service!
If you’ve been looking 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 Franchise 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.
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 consultant 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 that you’re not.
This is worth repeating.
When you work with a franchise consultant who’s offering his services for “free,” you are not his client.
The franchisor is.
Bob, The Franchising Consultant
“But Joel, Bob-my franchise 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. 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“
I have 3 more questions for you , Bruce.
1. Is he looking our for your best interests?
Or
2. Is he looking out for the franchisors interests?
Or…and this one is key…
3. Is he looking out for his own interests?
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 they find candidates is by advertising-usually online.
Finally, you’ve learned that when you work with a franchise 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 Consulting Group
First off, you need to know that today’s franchise consultants-in most cases, are part of a group of franchise consultants. Independent (solo) franchise consultants are few and far between these days.
And in order to become part of a franchise consulting group*, an upfront investment is required.
Your Website Could Be Making You Money Learn More
*Some groups are actually franchise organizations who 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 $25,000-$50,000+ upfront to become a consultant. In addition, these organizations charge ongoing monthly fees for website maintenance, and marketing etc.
What Consultants Gets For Their Money
After a new franchise consultant pays her fee, and signs the required 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.
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?
Franchise 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. Anyway…
Buying leads is the main way today’s franchise consultants 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 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, and why attendees should consider working with him -for free- to find the franchise of their dreams. Etc. Etc. Etc.
Checking In
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.
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 franchise 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 can get paid a commission (or two) for doing so. And sometimes, the franchisors in attendance pitch in money to help pay for the room being used, and the adverting 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 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.
Tip: If you’re thinking about working with a Franchise Consultant, ask them these 10 questionsbefore you agree to let them suggest franchises to you.
Finally, I shared a lot of information in this article, so bookmark it so you can refer back to it later.
Part 2 has been published.
It’s an A-Z on what you’ll experience when you work with a franchise consultant.
Check out what happens when you work with a franchise consultant. (Which is Part 2 of this article.)
Image of the arch courtesy of Bev Sykes, on Flickr.
Image of lottery winner courtesy of Vimeo
FAQ’s
What do Franchise Consultants do?
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.
Why do Franchise Consultants offer their services for free?
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.
How much do Franchise Consultants make?
On average, Franchise Consultants make $20,000 every time they successfully place someone into a franchise they represent.