Pros and Cons of Working with Business Brokers

Sep 8, 2015 | General

Buying a franchise can be a big undertaking and many people looking to invest can quickly find themselves feeling overwhelmed. Professionals known as business brokers or franchise brokers can help alleviate some of this stress by doing much of the leg work for you.

Nevertheless, it is important to remember that there are pros and cons to working with business brokers.

On the pro side, a franchise broker can save you an immense amount of time and headache. There are so many franchises available, that going through all that information on your own can be a real hassle. And you could even end up doing a lot of work researching a particular company only to discover that it is not suitable for you.

By using a business broker, you’ll be working with someone who already has knowledge of a number of franchises and can quickly help you weed out the opportunities that are not right for you. Especially if you are a first time franchisee, the knowledge and resources that a broker can provide are extremely valuable.

Another advantage of using brokers is that they can save you money by helping you to avoid costly mistakes. When franchisees choose a business simply because they like a product or service, and fail to consider the business model itself, it can lead to dissatisfaction and even financial hardship.

Brokers also tend to have large networks of professional contacts in the franchise industry including franchise attorneys and accountants who can help you with some of the more complex aspects of owning a franchise.

With so many advantages to using a franchise broker, you may be wondering if there is any downside. The fact is there are some factors that some might consider cons as well.

It is important to remember that most brokers earn their living in the form of commissions from the franchisor when they make a sale. In itself, this is not a bad thing – unless, of course, you feel that you are being pressured to sign a contract that you are not ready to sign.

A reputable broker however will not pressure you. They want to make the sale, but they also want to find good matches for the franchisors whose business they wish to keep.

The positive side of the broker working for the franchisor is that it means their services are free to the franchisee.

Franchise brokers typically represent a number of franchisor clients, so it shouldn’t be too difficult to find at least a few businesses on their client roster that meet your requirements. Nevertheless, they cannot possibly represent all franchises. So if you have your mind made up on a specific company, you may have to do some calling around to find a broker that represents that particular franchise.

Should you use a business broker?

While there are many advantages, the choice to use a business broker is ultimately up to the individual. Seasoned franchisees who are buying additional branches of a familiar franchise probably don’t require one, but those new to the franchise world would do well to have one. Those who fall between these ends of the spectrum must weigh the pros and cons for themselves.