The franchise industry dates back to the 1800’s and first started in the US. Franchising is now a significant amount of Gross Domestic Product (GDP) of many countries around the world. In some countries like the US and China, it contributes as much as ten percent to the country’s total GDP and employs tens of millions of workers. It’s success has led to world renowned brands that we all take for granted today, such as KFC, McDonald’s, Starbucks, Burger King, Little Caesars Pizza, Texas Roadhouse, Chili’s, Mango Tree, WAYNES Coffee, COCA Restaurant, Mathnasium, Bricks4Kidz, IWG / Regus, Ace Hardware, and countless more.
Franchise brokers or consultants are hired franchise and licensing professionals whose sole jobs are to help their clients with franchise sales, and in some cases, assist business owners and companies that wish to make their business franchisable.
Professional brokers and consultants are compensated by their clients and never represent both sides (aka. franchisor AND franchisee). Despite this, some brokers do represent both sides, which leads to a strong potential for conflict of interest. When a franchise is sold then franchise brokers get paid. Be careful with those who claim to be brokers or consultants and will do it for “free” or with no upfront fee – as the old saying goes, “You get what you pay for.”
Brokers and consultants are especially helpful to franchisors who do not have people on the ground or have limited knowledge about franchising practices in their targeted markets. For example, VF Franchise Consulting is a leading franchise broker based in Asia for nearly 15 years and focuses on Asia, including Southeast Asia (ASEAN), South Asia, North Asia, and Australasia.
Qualified franchise consultants can advise franchisees and entrepreneurs on the critical steps of franchising, from conducting franchise feasibility studies or market consumer research, to contacting the franchisor and assisting with the franchise business planning and negotiations with the franchisor.
Qualified franchise brokers often represent a portfolio of franchise brands that are available for various markets, with franchises in food and beverage, retail, education and training, lifestyle and fitness, services franchises such as International Workplace Group (IWG), Go Fit, Fire Fitness, etc.
Franchisees can save significant amounts of time and effort and avoid costly mistakes that are usually not reversable when the franchise deal is done. Qualified franchise brokers are knowledgeable about the franchise industry for their part of the world and will help franchisees determine whether a franchise opportunity is feasible for the intended market. They can also advise franchisees when it comes to negotiations with franchisors – knowing what is negotiable and what is not negotiable will increase a franchisee’s prospect of securing the franchise while at the same time saving significant time and legal fees.
For franchisees, be sure to select an experienced franchise consultant to help you purchase a franchise or to help make your business franchisable. The consultant should have significant experience in these areas, and the company’s main business should be franchising. Be wary of individuals or companies that lack focus and are juggling various types of services at one time. Like anything else, lack of focus often leads to a lack of professionalism and results.
For franchisors, be wary of franchise brokers that represent too many clients at any one time. Focus, again, is key to mutual success for the franchisor and the franchise broker. Be sure to ask the franchise broker about their recent track record for franchise sales and whether the franchise sales are for single units or multiple units (e.g. area and/or master franchises). You may also want to ask the franchise broker what their client attrition rate is – the lower the attrition rate, the likelier the franchise broker is meeting the clients’ expectations. If you use the criteria above, your chances of closing franchise deals go way up while reducing the chances of wasting money and time (and lost opportunities) due to poor broker performance.
We are in the midst of recovering from the pandemic – is this the right time to purchase or sell a franchise?
This is perhaps THE key question of the day as it relates to franchising. While the question is simple, the answer is a little more complicated.
While not every company or entrepreneur can take on more projects, if you are then you should seize on this opportunity for the following reasons:
For similar reasons, this could be the ideal time to plan for your business’ expansion, whether it is to target additional territories for your franchise or to start the process of making your business franchisable. The advantages to doing it now versus later include:
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Author: Sean T. Ngo is the CEO and Co-Founder of one of Asia’s leading franchise consultancy, VF Franchise Consulting. He is Asian American and has been living in Vietnam for over 16 years. You can reach him at [email protected] or [email protected]