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One of the most important lessons that I've taught my daughters is that it's always better to have options in the pursuit of any goal. Many times during my career I have applied for jobs that I wasn't entirely sure I wanted. But I always wanted to be the one in the position to say no.
One of your top strategies in searching for the best franchise opportunities is to make the most of your options. And one of your best options is to engage the services of a franchise consultant or broker (there may be legal, technical or other distinctions, but they're effectively the same thing) who can add real value to your search. This is a bit self-serving as I am a franchise consultant, but I truly think a properly vetted franchise consultant should be a "no lose" option.
Why? Well, first, franchise consulting generally is a completely free service. I say generally because some consultants may charge you a fee. But in most cases, the consultant is paid a referral fee by the franchisor if you sign up for a franchise and you pay nothing.
But you may ask, can't I just go it alone and get a reduced franchise fee or some other concession in consideration for the saved referral fee? Anything is possible, of course, but the answer is likely no for two reasons, one technical and one practical.
The technical reason is that under Item 5 (Initial Fees) of the franchise disclosure document (FDD) franchisors are required to disclose the range of initial fees when they are not uniform. For obvious reasons, franchisors are unenthused about giving a prospective franchisee any reason to think that he or she can negotiate the franchise fee or other initial fees toward the lower end of a disclosed range. The optimal way to thwart such thinking is to have no range to disclose.
The practical reason is that many franchisors outsource or supplement their sales and marketing efforts with franchise consultants. Even with the referral fees, this can be a very cost effective and far-reaching alternative. This alternative would be untenable, though, if the franchisor provided fee concessions for prospects who are not represented by a franchise consultant.
Second, there is never any obligation on your part (unless, of course, the franchise consultant does not work on a referral basis and looks to you for the fee). The minute that you decide that your franchise consultant is not adding value, you can immediately part ways and secure the services of another consultant, go it alone, or drop your franchise search altogether. That is, you have instant cost-free options.
All of this assumes that you're getting value from your consultant. How do you determine whether you're getting value? While there is no real substitute for your good judgment, the following are the best value indicators for a franchise consultant:
There are many very good franchise consultants. You truly are foregoing a great option if you conduct your franchise search without one. Unfortunately, there also are many not so great consultants. Some are little more than lead churners who move rapidly through paid lists and only look for quick sales. If you feel like you're being hustled, you probably are. In that case, drop your consultant like a hot rock. That's also your option.
Mike Sheehan is a franchise consultant and attorney. He is the president of Focus Ventures (www.focusonfranchise.com) and formerly served as a securities attorney and as general counsel for a Fortune 100 financial services company. His Franchise Focus Blog (www.franchisefocus.blogspot.com) focuses on helpful information, tips and current news for prospective franchisees.
This article should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only and you are urged to consult your own franchise attorney concerning your own situation and any specific legal questions you may have.
© 2012 Mike Sheehan. All rights reserved.