Franchise and Business Brokers Have Financial Motives
Each of our clients is at an extremely vulnerable intersection of a major life decision about whether to consider self-employment as a career alternative. Managing risk starts with becoming self-aware and understanding the environment that you will encounter. It is important to understand that the individual you contact will have a financial motive (right or wrong), and a direct or indirect sales proposition.
Our clients who have a heightened commitment to managing risk are passionate about the process of making high-quality life decisions without responding with “gut instincts” to a sales-motivated agenda. Additionally, our clients possess a cautious self-protective quality with a strong interest and the right attitude to shield themselves from walking into the three most common emotional business decisions while avoiding disaster at this fragile intersection of life.
- Franchisor/Concept: A well-intended, highly trained, experienced and commission-compensated franchise salesperson (through frequent daily texts and telephone calls until they connect live with you) is skilled at creating a trusted sales process to invite you to quickly complete the following:
- a franchise application
- a personality test
- step-by-step virtual sales information calls
- review of their Franchise Disclosure Documents
- application for funding
- validation with existing franchisees
- invitation to a corporate discovery day (scripted by the hour)
- This is all done within five weeks to let you know they have decided to award you a franchise with an internal goal to fast-track this sales process within 4-6 weeks.
- Local Existing Business “For Sale”: A business broker has a limited inventory of local businesses for sale and is highly adept at controlling the sales process, similar to purchasing a new car. Generally, these sales brokers are only paid a commission of 6-10% of the sales price. Their fiduciary loyalty is to the seller of the business, and yet, when you call, there is an implication that they can help you. This represents an immediate, inherent conflict of interest. This sales broker wants the highest price for the seller, yet you want the lowest price. This does not include the potential gaps of due diligence and information that may exist because of this bias to the seller. Buyer beware! You will find yourself agreeing to purchase “as is,” only to learn about financial mistakes after it’s too late.
- Franchise Referral Services: There are as many as 10 franchisor brokerage companies within the United States, each with up to 100 home-based highly trained sales consultants, totaling over 1,000 broker/consultants nationwide. Their franchisor negotiates a 25-50% placement fee paid upon you being successfully referred, sold and placed into a franchise system by one of their trusted brokers. The consultative sales protocol will be to text, call and interview you for capital availability and experience. You will be asked to take a personality test on a remedial basis to show you three franchise concepts to support your passion (love) for a certain business, as this provides momentum to closing a sale.
Prior to introducing you, they will ensure that the franchisor has a highly skilled franchise sales person so that they can be certain they will receive 40% of the initial franchise fee upon you signing your Franchise Agreement. More importantly, if full disclosure were a requirement, you might learn that some brokers refer their clients to the same 3-5 franchise concepts so that the franchisor sales system will not lose the sale. You might also learn that many brokers will only show franchise concepts that pay them the highest placement fees.