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FranchiseMart's Gary Lengel shows a video introducing a franchise matchmaking business at the International Franchise Expo. Photo/Blue MauMau
WEST PALM BEACH, Fla. (Blue MauMau) - A Florida company, FranchiseMart, is matching buyers with franchise concepts at storefronts. If that weren’t innovative enough, it joins a small group of franchise matchmaking services in practicing what it sells —providing investors an opportunity to become franchise owners for FranchiseMart itself.
In January of 2007 FranchiseMart opened its first retail store in West Palm Beach, Florida. The owners of the franchise stores develop local expertise, setting up local retail showrooms. The franchisor that sells franchise concepts is a subsidiary of newly formed United Franchise Group. FranchiseMart’s sister companies include well established brands, such as Sign-A-Rama, EmbroidMe and Billboard Connection.
Each retail location has a flat-screen television that displays franchise videos, stands, posters and educational seminars. FranchiseMart franchise owners provide leads for a fee to franchisors and also receive revenue from local real estate sales.
Gary Lengel, the executive vice president of FranchiseMart, states strongly that his firm is different from typical brokerage services. Mr. Lengel states, “We are different from a franchise broker. We’ve put pretty much all our franchisors on an even playing field. By that I mean that our commission is based on a fixed, flat fee. Typically brokers get a percentage of the sale, so in many cases they lean towards the franchise with the highest commission because that’s the only way they make money. We have multiple income sources in FranchiseMart.”
Franchise consultant Nick Bibby, who is not with FranchiseMart, has his reservations. Says Bibby, "This is just another variation on the 'brokerage' theme. When a percentage 'or' a flat fee is paid on the sale of a franchise, it’s a commission. Further, this is not a ‘consultancy’ for franchise buyers. As a 'fee for service' consultant, I am paid an upfront fee to provide services strictly focused on the client’s best interests, not mine. Any other interpretation of the term ‘franchise consultant’ is a gross shading of the truth. Brokers are not consultants —at least not for buyers.”
Even if the matchmaker is only compensated by the company they represent, FranchiseMart has over a hundred different franchise concepts to choose from. And no matter what its franchise owners may be called, they will have potentially multiple income sources. The franchise owner receives remuneration for sold services of the United Franchise Group, ranging from financing a new business to real estate transactions. “We have a company called Franchise Real Estate that helps out for location site search. We can help them with financing and we also have three other service divisions of United Franchise Group,” says Mr. Lengel.
FranchiseMart has proprietary software to assist buyers. Lengel states, "We wrote them based on our experience, knowing the questions to ask somebody, such as, ‘What hours would you like to work?’” He continues on to say that buyers are not pushed into any one franchise. “If someone says to me, 'I have $250,000 to invest in a business,' I’ll show them franchises from $250,000, but I’ll also show them franchises that are from $25,000-$50,000. Just because they have that amount of money doesn’t mean we have to put them in a business for that amount of money.”
Bibby thinks that discovering the right franchise opportunity is much more than 72 questions from a software evaluation and providing cheaper opportunities than one’s financial limits. Says Bibby, “After years of working in the area of personal planning as it regards entrepreneurship, I do not accept that any type of questionnaire (paper, computer generated, or otherwise) can yield a trustworthy roadmap for a franchise buyer. Matchmaking can lead to very dangerous outcomes, especially when the prospective franchisee is inexperienced regarding self-employment and/or due diligence.”
FranchiseMart started a prototype in January of 2007 and now has several locations in West Palm Beach and other areas. The total package is between $110,000 and $115,000. The company will finance about 75%, so the initial investment is betwen $30,000 - $35,000. The franchise fee is $29,500.
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Read a full interview with Gary Lengel, Vice President of FranchiseMart
FranchiseMart Concept Fills a Need
Speaking from the point of view of prospects who want to get into their own business, FranchiseMart sounds very attractive. A storefront in a convenient location is less intimidating and probably has an appearance of less pressure to most people. Over one hundred franchises available sounds a lot better than 10 to 20. Posters, videos, website links, seminars and a helpful person on hand who knows a lot more about those companies than I do and is not pushing one over the other because of the flat fee all sound good. A questionnaire that quickly brings my situation into clearer focus doesn’t sound bad at all. If there’s no questionnaire, it seems to me that some important questions might very easily be missed. I don’t see anything in the article that says that FranchiseMart is relying 100% on that questionnaire’s results to put anyone into a franchise.
If I can get some local help with suitable real estate, what’s not to like? From what I’ve been reading about franchisee problems, inability to find a suitable location for the right price is often a huge obstacle, one that involves forfeiture of franchise fees.
Re: FranchiseMart Concept Fills a Need
You must be kididng FranchiseMart is franchise brokerage nothing more. And these FranchiseMart brokers certainly don't have a great franchising experience.
Heck if you opened one up in your town how much valuable franchise experience would you have to offer?
The Truth Shall Set You Free!
TIF
FranchiseMart for Franchise Seeker
TIF, I guess I didn't make myself clear. I was talking from the point of view of a FranchiseMart customer. If I were thinking of getting into another business, dropping into a local FranchiseMart that had over 100 franchises to show would be convenient and a great way to get a fast overview of a lot of franchises. There's nothing like that now, that I'm aware of. Whoever I talked to at a FranchiseMart should know a lot more than I would about the different franchise businesses represented and whether or not they might fit my business goals. That's a real service. But if he or she didn't, there's nothing to keep me from walking out again with all my money intact. The point is that I walked in to see what they have to offer, and I think that if FranchiseMart does this right, a lot of people are going to be interested in their services.
As for franchising experience, I don't get the idea that franchisor sales staffs are made up of people with great franchising backgrounds that would be superior to the staff of a FranchiseMart, do you? They're there for sales, not to teach me or anyone else how to have a successful franchise. One of the advantages of a FranchiseMart is that they have over 100 franchises to pick from and a method of helping me find the best one for me. If I'm talking to a franchisor's (not FranchiseMart's) sales person, all I'm going to hear about is one franchise company. Nothing wrong with that, but many people are going to want to see a broader spectrum of what's available, at least to kick off their quest for their own business.
Re: FranchiseMart for Franchise Seeker
Guest what's your point? FranchiseMart has little to offer its franchisees and its customers.
Your uninformed opinion makes little if any sense.
The Truth Shall Set You Free!
TIF
Fatal Flaws of this model
1. The founder, Ray Titus. This is the character who goes to franchise shows, has sales guys with brochures on top of music stands, and sells, sells, sells. This is not a guy who understands a consultative sales, coaching, or consulting. His approach is "sell them a franchise and let God sort them out."
2. Margins. Franchisees only make 8K per deal for most franchises (at last check). THere is not enough margin for franchisees of Franchise Mart to make a living. THerefore they will act desparately and do anything necessary to close deals, hurting others along the way.
Bad leadership.
Bad business economics.
Run like the wind.
However, it looks sexy so people will no doubt buy it.
Too bad.
Fatal Flaw Actually a Beauty Mark
Contrary to what you say, I think Ray is the family member who DOES NOT like a sales team using brochures on top of music stands at trade shows - not that there is anything wrong with that. That is Minuteman Press. He is the guy that broke away from the family business and proved to the world he could be successful and innovative with his own thing.
If you are correct on the $8k per franchise sold (you don't provide links or proof so who knows), that actually is quite refreshing. Remember, having a considerably lower price in buying a franchise is good for customers - the franchise buyer and franchisors.
Franchisors are so desperate for sales nowadays that they have been paying brokers tens of thousands of dollars and lately they have been even willing to give part of all future royalties. Such a high sales price makes the burden on the buyer heavier - after all, the franchisor has to get those fees back and then some.
Lower prices are not so bad for FranchiseMart's franchise owners as well. Remember, the article said that FranchiseMart's owners have many other sources of revenue. Think about it. Their margins can be thinner on the franchise sales since they have other profit centers.
This is a competitive advantage.
The writings of worried competitors are sparking my interest in this firm, especially if the worst that can be said—erroneously, in the first instance—is that company salesmen use music stands and that their prices are too cheap.
Darnelle: You do not know what you are talking about
You obviously never met Ray Titus or discussed franchise sales philosophy with him. At a recent IFA event, he boldly proclaimed that franchisors should never work with brokers. He is as "hard sell" a franchise salesperson as they come. He is unapologetic in his approach.
Titus grew up in the family business WHICH IS MINUTE MAN PRESS. He shares the same philosophy and approach, with or without the music stands.
Broker fees being low is bad for the broker and the lead both. The 8K broker fee (which I heard from Ray TItus' himself) IS NOT ENOUGH FOR A BROKER TO LIVE ON. Since the franchise costs the same REGARDLESS OF THE BROKER FEE, the broker will be hard pressed to do what is in the brokers, not client's best interest.
This Firm's Leader Sounds Impressive
Guest: "At a recent IFA event, he boldly proclaimed that franchisors should never work with brokers."
Hadn't heard that. This is yet one more reason why I am warming up to Ray Titus the more I read these posts. Titus announces that he does not like what he sees with existing franchise brokerages (what franchisor does?) and then creates a business that addresses the pain of the buyer and supplier - including broker's fees that are astronomical.
Now his competitors complain that FranchiseMart's broker fees are way too low.
I also like the fact that he grew up at Minuteman Press. It tells me that there is a strong root in understanding franchise fundamentals to prepare him to innovate. He walked away from the family business to blaze his own path?
Now that's leadership.
Please tell me more about why you don't like this guy and company.
You are right Darnelle
I am wrong Darnelle, you are right.
Please invest your life savings in this company and follow their system to a "T." No doubt you will succeed beyone your wildest dreams. Please remember us little guys on your way up.
FM leadership and the games we can play with territory.
1. The leadership and the mindset -
http://www.ripoffreport.com/reports/0/001/ripoff0001602.htm
2. The FDD provides for a territory, but not a given size. Hence, my guess is that if you want a FranchisMart and you live in a remote area, then .... you can probably have one.
Years ago, while simply walking by a Minuteman Press booth at a tradeshow, I couldn't get a salesman out of my face until I flat out told him to buzz off. There is nothing new here.
Nick Bibby is a franchise consultant and principal of the Bibby Group.
I don't know about the leader, but
the model is suspect. Any model that lets someone else "touch" your money while it is en route to you is a model that facilitates theft. I have seen dozens of such models and not one of them was honest. There is always skimming beofre the final remission occurs. "Mistakes" are always in favor of the franchisor, and they never get corrected when the franchisor is called on it.
I suppose that there could be an express formula for the money mechannics, but there never is. The money mechanics are always nonspecific. I get the money; I take out what I am entitled to; and you get the rest - - way too unspecific.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Worried
Darnelle,
I am only worried about one thing:
1. I am worried about what will happen to the suckers that buy this. 2 years from now, units will be closing all over the place.
There is plenty of business out there for folks that do the right thing, day in and day out.
Get out of the ether, Darnelle
Franpro
Further, with regard to the FranchiseMart concept...
I would also add that at $100K+, this must be the Rolls Royce of all franchised brokerage opportunities even considering that you get a 'showroom' with posters and a 42" flat screen TV. Wow.
However, because this concept is strictly a sales business, and because outstanding sales people are among the highest income producers of all occupations, I'd really like to know if FranchiseMart will cough up an earnings claim based on the success of current operations to make its own franchise sales pitch believable. How about it?
Nick Bibby is a franchise consultant and principal of the Bibby Group.
Rolls Royce Appreciates
Competitor brokers must pay a franchise fee for the privilege of selling out of their home or rented office - hence their total investment is considerably cheaper than having your own store. If the FranchiseMart real estate belongs to the owner, $100k sounds like a steal of a deal compared to other retail businesses that have investment price tags of hundreds of thousands.
By having a retail presence with showroom equipment, it would be a Rolls Royce of the industry. It should be pointed out that a collector's Rolls Royce gains in value as opposed to depreciates.
Darnelle, you've become
a stand-up (or typewriting) comedian, right?
Nick Bibby is a franchise consultant and principal of the Bibby Group.
I agree with Nick on this one.
I haven't seen any of the documents on this at all. My guess is that the sales produced are produced in the name of FranchiseMart, and that FranchiseMart gets paid by the franchisor. Part of that commission is deducted for the FM split/royalties are then also taken out, and some residuum is then passed on to the franchisee. I hope FranchiseMart will correct me if I am wrong about that.
Whenever a franchisor is wiling to finance part of the initial investment, it is usually the case that the money mechanics works the way I just described.
Whenever you let someone put their hands on your money before you get it, you should buy a lot of lubricant, because you will get hosed every time.
This is a rough game for rough people. I'm certain that the 72 questions are carefully engineered to elicit exactly the answers that the sales person wants. That's an old sales gimmik.
Odd, though that the number of questions to be asked is the same as the number of virgins that a jihadist suicide bomber will get in heaven after he blows himself up. Hmmmm! Could there be a connection? The jihadist doesn't get 72 virgins, and the customer's answers to the 72 questions won't get him a heavenly investment either.
Am I being insightful, or am I just being the same old disgusting negativist asshole I usually am? Facts anyone?--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Old NA
Richard writes: "Part of that commission is deducted for the FM split/royalties are then also taken out, and some residuum is then passed on to the franchisee. I hope FranchiseMart will correct me if I am wrong about that."
Section 5 E of the franchise contract states that the FM will collect the referal/commission fees from the franchisor, deduct royalty, advertising, and transaction fees owed, and remit the rest to the franchisee.
You are dead in the water without control of your cash flow. But this concept will sell - after all, you only need to be a meet and greeter.
At least their contract is written in plain english, you have been told what is going to happen to you right up front.
Michael Webster PhD LLB
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