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By: Arlette Measures
Franchise Brokers—Should You Use One or Not?

Franchise brokers—who also refer to themselves as “business coaches,”“advisors,”“referral sources,” or “sales consultants”—help people who want to buy a franchise. They often advertise on the Internet and in business magazines that they will help you select among various franchise options. There are advantages and disadvantages to using a franchise broker. Here are a few things to keep in mind.

Typically, a broker reviews the amount of money you have to invest and then directs you to opportunities that match your interests and resources. A broker also may help you complete, applications and the paperwork to consummate the sale. Remember that franchise brokers often work for franchisors, and get paid only if a sale is completed.

Some franchise brokers may claim to be able to match you with “the perfect opportunity” because they represent a wide range of business sellers. In some instances, however, franchise brokers represent only a few franchisors, and, as a result, their suggestions may be limited. Some brokers earn a flat fee regardless of the price of the franchise they sell; others earn a commission pegged to the price of the franchise the broker sells. Some brokers may steer you toward a more costly franchise to beef up their own commission.

To convince you to buy a particular franchise, a broker may make certain representations about income.
Earnings claims may not be true, and sometimes, can be misleading even if literally true.
You should receive the names and contact information for other buyers of the franchise— current and former franchisees. Talk to them, rather than relying on information from the broker alone. It’s always a
good idea to visit franchised outlets in your area and talk to the owners about their experience with
particular franchisors.

The Uniform Franchise Offering Circular

In addition to the routine investigation that should be conducted prior to any business purchase, you should be able to contact other franchisees before deciding to invest. You can obtain a Uniform Franchise Offering Circular (UFOC), which contains vital details about the franchise's legal, financial, and personnel history, before you sign a contract.

This document will tell you how long the franchisor has been in business, who are its competitors, and any special laws that pertain to the industry, like any license or permit requirements. This will help you understand the costs and risks you are likely to take on if you purchase and operate the franchise.

Read the entire disclosure document. Don’t be shy about asking for explanations, clarifications, and answers to your questions before you invest.

When reviewing the UFOC, look for contact information for current franchisees and franchisees who have left the system within the last year; talking to them may be the most reliable way for you to verify the franchisor’s claims. Visit or phone as many of the current and former franchisees as possible to chat about their experiences, and the volume and type of business they’re doing. Note that some of them
may have signed confidentiality agreements that prevent them from speaking with you. If that’s the case, try contacting others on the list.


If you buy an existing outlet that was reacquired by the franchisor, the franchisor must tell you who owned and operated the outlet for the last five years. Several owners in a short time may indicate that the location isn’t profitable or that the franchisor hasn’t supported that outlet as promised. Consider contacting several previous owners to learn more about their experience operating the particular outlet.
The tax rules surrounding franchises are often complex, and an attorney, preferably a specialist in franchise law, should assist you to evaluate the franchise package and tax considerations. An accountant may be needed to determine the full costs of purchasing and operating the business as well as to assess the potential profit to the franchisee.

Before You Sign the Franchise Agreement

The company’s disclosures may change between the time you receive the disclosure document and the time you sign the franchise agreement. For example, the company may have updated its disclosures; it is required to do that at least annually after its fiscal year ends. You have the right to ask for a copy of any updated information before you sign the franchise agreement. An updated disclosure document may indicate the filing of new suits by or against the franchisor, changes in the franchisor’s management team, new financial data, and more current financial performance data, among other information. Check with the local Better Business Bureau (BBB) in the city where the franchisor has its headquarters. Ask whether there are complaints on file about the company’s products, services, or personnel.
Several states regulate the sale of franchises. Check with the state office that regulates franchising—it may be the Office of the Attorney General—for more information about your rights as a franchise owner in your state.

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