A person who does franchise consulting is like any other kind of consultant that holds client relationships as its focal point. Normally, a franchise consultant will be charging a fee to their client in exchange for advice. This is the traditional definition of franchise brokerage.
However, during the late 1990’s some franchise salesmen and other brokers started denoting themselves as free consultants to people who were interested in purchasing franchises. They provided introductory services for franchisors where they worked out a pay-for-sale arrangement. This normally wouldn’t be an issue, but it poses some problems, they are in a bad position and won’t be able to give real advice to possible buyers, without being biased.
If specific franchisors are in need of a specific service, they should hire a real consultant. This service may comprise of the development of their franchisor agreement, creating business plans, marketing tips, sales advice, or other kinds of 3rd party consultation services. After hiring a consultant, they will need to outline their contract and coverage of the service. When this is done, they will then have to pay consulting fees. It is just like residential or commercial real estate brokerage, mortgage brokerage, and leasing brokerage. There is a corresponding fee for this service.
Over the past decade, this definition has been altered because many franchise sales networks used the term “franchise consulting” or “franchise consultant” to depict “franchise brokerage”. As an alternative, the consultant will be offering their assistance at no cost to the client. They will only receive payment if the client chooses to buy a franchise. This different definition undermines the concept of franchise consulting.
It is hypocritical to depict oneself as one thing such a consultant, when the truth is they are doing something entirely different. This topic has caused a number of debates in the franchise industry. Regrettably, as franchise networks keep on growing, it could possibly marginalize it. This issue has been discussed numerous times in Linked-In Forums, various trade shows, and radio programs dealing with franchises.
Please note that there is completely nothing wrong with franchise brokerage. Certain brokerage firms such as Franchise Alliance assist clients in finding the best franchise opportunity for them without giving biased opinions. Franchising systems are trying to find ways to expand their brands and most franchise models influence their relationships with many brokerage networks.
The question here is whether or not they can truthfully explain and outline their position about certain franchises. A broker that is compensated by means of franchise sales can be defined as a franchise broker. A person in the field of franchise consultation and is able to offer various added services for a fee, can be called a franchise consultant.
This discussion is nowhere near getting settled in the immediate future. However, as the franchising industry keeps on maturing, it will be better to call them according to what they actually are and possibly in the future this will happen. It is essentially all about transparency, or basically just providing full disclosure.