Franchise Broker vs. Franchise Consultant | What is Better? (2023)
Written by: Patrick Findaro
Last Updated by
Facundo Bermudez: January 20, 2023
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Franchise Broker vs Franchise Consultant – Differences
This is Patrick Findaro here, co-founder at Vetted Biz and Visa Franchise. So, I had another video on the difference between a franchise broker and our franchise consultant. Today, we are going to face Franchise Broker vs Franchise Consultant.
As a reminder, a franchise consultant is paid by a client. The client could be the franchisor where they’re developing a franchise system, or they’re helping the franchisor improve their operations. Or it could be paid by a prospective franchisee that is looking to evaluate franchises.
A franchise broker is paid solely from the franchisor generally as part of the franchise fee. Franchise broker networks do exist. There are many franchise broker networks.
Last time we checked, there were 10 franchise broker networks that had contractual relationships with about 400 franchises. So, there’s over 1,800 franchises in the United States, but these franchise broker organizations only have contracts with 400 franchises. So today, I want to go through some of the franchises that a franchise broker is never going to show you, as they’re not going to make any money putting that franchise in front of you.
Franchise: Chick-fil-A
So, the first one I wanted to go through is Chick-fil-A. You have 10,000-plus people applying to be a Chick-fil-A franchisee every year. You can invest as little as $10,000 and Chick-fil-A corporate, the franchisor, is going to invest $2 million-plus, the other capital required to open that Chick-fil-A location. Many Chick-fil-As are doing over half a million dollars in profit, and there’s a profit split between you, the franchisee, and Chick-fil-A corporate, the franchisor. Chick-fil-A does not compensate franchise brokers. So, a franchise broker is never going to evaluate Chick-fil-A to see if it’s a suitable business for you.
Franchise: IHOP
IHOP is another brand, International House of Pizza that’s been around for many years and is…IHOP, another brand, International House of Pancakes has been around for many years and is the top pancake and breakfast-focused franchise. We placed a client as a franchise consultant to open up 20 IHOP locations, of which we received no compensation from IHOP. And that’s fine. The client paid us an upfront fee. We were representing the client, but that’s an example, number two, of a franchisor that your franchise broker is not going to show you because they’re not paying the franchisor.
Franchise: McDonald’s
McDonald’s is another option. We looked at that for a client a year back and McDonald’s corporate, at the time, was really just expanding with existing franchisees of McDonald’s that already had one, two, three, five locations, and they wanted to open up more locations.
Franchise: Domino’s Pizza
Domino’s Pizza is an amazing franchise that it does not take outside… Domino’s Pizza is an amazing franchise, probably the most profitable pizza franchise, especially when you look at how much it costs to open up a Domino’s. But right now, they’re just taking in as franchisees current employees of Domino’s that have risen through the ranks and want to open up their own franchise of Domino’s.
The average franchisee, last we checked, had over five Dominos’ Pizza locations and should be doing over a million dollars of profit. So, not a bad way to make money. It’s starting at the bottom and earning your way up to open up, you know, five locations of the brand that you’re working for, and you started as an employee, and to start making a million dollars isn’t bad. So, your franchise broker is definitely not going to tell you about Domino’s, and they probably didn’t even know those facts.
Franchise: Subway
Subway is a franchise that I would not advise anyone to invest in right now. Last we checked, there were closing 1,400, 1,500 locations per year, while they were only opening up 400, 500 locations. So, this is going back to prior 2016, ’17, ’18, ’19, they were basically closing two times the amount of locations as they were opening. And Subway franchisees are cannibalizing each other, where Subway corporate did not do a good job of protecting the existing Subway locations from new locations that were opening up where a new location opens up and sales drop for the existing location. Last we checked, Subway does not compensate franchise brokers.
So, although we don’t think it’s a good business, and we wouldn’t recommend it for any of our clients, your franchise broker’s never going to recommend Subway as they’re not going to get paid for it.
