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Franchise Sales Outsourcing vs. Franchise Brokers: The Differences

Strategic Franchise Development • May 03, 2020
The U.S. was home to more than 773,600 franchise establishments in 2019. A growing number of companies are choosing this business model to expand their reach and generate more revenue.

As a business owner, you may not have the time or expertise required to franchise your operations. On one hand, the legal process is extremely complex and involves extensive paperwork. On the other hand, this business model requires its own set of skills.

One way to overcome these challenges is to reach out to a franchise broker. Another option is franchise sales outsourcing (FSO).

A good broker can save you time and effort. In the long run, you'll also save money. The downside is that they may fail to consider your best interests since their only purpose is to close the deal.

Outsourced franchise sales, by contrast, will handle each and every aspect of promoting and selling your franchise. They will represent you — the franchisor — and do what's best for your business.

Not sure what to choose? Here's what you should know about franchise sales outsourcing versus franchise brokers so you can make an informed decision.

What Is a Franchise Broker?

Decades ago, prospective buyers have limited access to information about franchising opportunities. They had to make phone calls, ask for references, and attend industry trade shows. Things are much easier today due to the advent of digital technology.

Even so, franchisors have a hard time finding qualified leads. Many of them, especially those who are new in this business, don't have a dedicated in-house team to manage franchise sales. That's where franchise brokers come in handy.

These professionals typically work as part of Lead Referral Networks (LRNs) or broker networks. They represent dozens or hundreds of franchisors and charge a commission on sales.

Franchise brokers take charge of the sales process until they close a deal. Their responsibilities are similar to those of real estate brokers. They identify and provide leads to associated franchisors, acting as the middleman between sellers and buyers.

Once the sale starts, the broker receives a "success fee." His role stops here. It's the franchisor's responsibility to make the actual sale.

Some brokers charge a fee to accept franchisors into their networks. Others take a percentage of the royalty as well. That's something you need to consider when looking for franchise broker firms.

How Does Franchise Sales Outsourcing Work?

Franchise sales outsource companies have a more complex role than brokers. Although both have the goal, they use a different approach to the sales process.

A reliable FSO company will handle franchise sales from start to finish. These professionals are responsible for managing leads and offering pre- and post-franchise sales closing support. They also take charge of marketing and other activities involved in the franchise sales process.

These experts offer leadership and advisory services to franchisors. You can expect them to tackle the legal aspects, implement new technologies, and provide specialized services like CRM setup and management.

Generally, FSO companies charge royalty fees plus a commission for each franchise sold. Some don't take any royalty fees, though. While it's true that franchise sales outsourcing can be expensive, you'll make savings in the long run.

This option is more cost-effective than hiring an in-house team. An FSO company will manage every aspect of selling your franchise, except for signing contracts, approving candidates, and receiving payment from buyers.


FSO vs. Franchise Brokers: Which One Is Right for You?

The primary role of franchise brokers is to introduce franchisors to qualified leads. Franchise sales outsourcing firms manage every aspect of the sales process so you can focus on improving your business and its operations.

As a business, you're an expert in your field. Franchising, however, is a business on its own and requires specialized knowledge. That's why it pays off to work with a broker or an FSO company.

If you're ready to take the next step, reach out to our team! We have years of experience in franchise sales outsourcing and can guide you through this complex process. Contact us to discuss your needs.

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