Monday, October 15, 2007

Franchise brokers

I have no experience with franchise brokers. As Should You Use Franchise Brokers? from - points out, these are a fairly recent development. The following is a good summary of the pitfalls but I suggest franchisors and franchisees read the full article.

While the idea of finding an 'ideal match' for prospective buyers again sounds good in principle, individual brokers are often motivated by factors outside the buyer's best interests. Franchisors may pay different levels of fees, providing one clear-cut motivation. Some franchisors offer broker spiffs--ranging from bonuses to free trips to Hawaii. And of course, the broker doesn't get paid unless the franchisor closes the deal, so proven closers always rank high on the broker's short list when it comes time to make recommendations. Again, it's important to emphasize that many brokers do have a genuine concern for their franchise buyer 'clients.' But even the most altruistic broker will, at a minimum, be subjected to the kinds of outside factors discussed above.

If you are dealing with a franchise broker, I suggest reading this article and consulting a lawyer.