Franchising companies often use Business Broker to help attain sales goals. Here is an interesting fact. Most large Business Broker Chains promote franchises and charge franchises money to join their network and programs. Not chump change either. Then the Broker Network takes all the logos and prominently displays them in ads and websites, and titles, meta tags and key words those pages. So as to attract customers, franchise buyers. But when a franchise buyer calls up, they are sent to the local business broker who secretly hates franchises?
Why? Low success rate? No, high success rates, the broker cannot resell it in the future when it goes South, because it never does. Then he cannot get money to appraise it and put it back on the market and sell it again. In many places the same broker sells the same small business or company over and over again. Yep. That's right, who wins? The business broker's buddies in the Community Service Club, the attorney helping the deal along, the accountants doing the books and of course the broker who has an appraisal certificate and of course the appraisals happen to come out where? At the exact price for a quick sale and fat commission.
How fat? Fat enough for the FTC to regulate the pills and ads of such that the broker takes. $20,000 plus. But the broker will say it is hard work? Really? Selling the same company twice, three even sometimes four times is hard work? BS. But of course with franchises, the franchise fee is used to help offset costs from the franchisor's administration costs so normally the broker can only get $10,000 to 15,000 commission. Gee Whiz whose business is he going to push first? The one with the highest commission, just like a stock broker or financial planner tries to sell insurance annuities first, the commissions are much higher, why, because they are not as good and are harder to sell?
The Business Brokers, they are on their own team, not the buyer who they swear to help or the business seller who they listed the business. Nope, and then there is the franchisor. He/She has given them use of their brand name to use on a website and they take that and use that Federal trademark to attract buyers and then switch the buyer to a higher commission. And what about the franchisors who are only willing to pay a reasonable sum such as $4,000-$6,000 commission (actually finders fee) on a $20,000 franchise fee? Well those good franchisors businesses never get promoted and never get sold, yet they are being the most true to their team and systems by keeping commissions low and saving money to in turn better their franchise system. So the business brokers charge the franchisors lots of money, bait and switch call ins for a particular franchise for a dry cleaners or a car wash or something they can turn a huge commission and quick buck on.
And they can give earnings claims since they are simply a finders fee player, if you do not believe this happens check out a recent FTC opinion on business brokers. Then the business brokers knowing the tough nature of the franchising industry tell buyers that the franchises are no good and to ask how much income the buyer will make and if the franchisor cannot answer don't buy it. But in franchising we have laws about earnings claims where as business brokers do not. They have accounting and books to show the buyers of businesses who come into the business brokers offices.
But alas, everyone knows when the original owners of a business leave the volume drops a minimum of 20% because the new owner is not a familiar face, thus the old customers start shopping around and the excuse is they have no loyalty to the new buyer, since they always did business with Bob or Sam or the Smith family, you see? It gets worse the business brokers have a disclaimer that says when you buy a business that you realize they are not liable for any information given to you during the sale? Interesting since they are the appraisers, know the history, tell you that the franchisors are not to be trusted since they do not for the most part give comprehensive sets of earnings claims. Why? Due to lawyers and lawsuits and in adequate and unverifiable data and loss of proprietary information in disclosures.
So the business brokers use this fact to entice franchisors to list with them take their money knowing franchisors have to sell with their hands tied behind their backs then use their band name to attract buyers, then bait and switch the customers and have them sign a form stating the information might be here say (standard in the industry) check it out, and then to top it all off sell someone something that will not work and then in a year or two it is back on the market with guess who? The same broker.
I once had a discussion with some lawyers on the ABA Forum for Franchising discussing brokers and even they were unaware of this problem. You know more franchisors should be smarter and look into this. The FTC should not allow business brokers to do things that franchisors cannot. Actually they should let both do what the brokers do, but all should be truthful when doing so. Too many laws, too many loop holes, not enough jobs, not enough sales to build systems fast enough to build the economies of scale to compete with the Wal-Marts of the world. Franchising could deliver that level of fierce market competition regionally with economies of scale buying power and team work while giving back to the communities they serve and keeping the money local, but not with over regulation state by state and the inconsistencies in Canada, and with the FTC. We are allowing bad policies to dictate loopholes and never leveling the playing field, which shouldn't have been titled in the first place. How can every one not see what is so obvious. The business brokers are using extortion to get franchisors to sign up, because they can play by different rules. It would be like playing a chess match when the opponent has two queens, Yes if you are smart you can beat them, but not often. No one knows how to deal with this problem I have stated. But I do.
Dust the over burdensome regulation and you will not find everyone trying to go around them. We are not helping consumers we are killing franchise systems and killing the franchisees (also consumer) and franchisors already out there trying to build back the job base, which is just over 2/3 of all people employed are employed by small businesses. You know the franchising model is a perfect way to build efficiency into the small businesses of the future so that they can compete with global products produced for less money and with big box stores supplying consumers with everything but giving little back to help the communities (in most cases). I hope this commentary was thought provoking, if you have any questions about it, go find out for yourself. I have had much experience with this and I know what is going on.
Surely, someone in the government regulatory area has a clue? Well, maybe not so surely, but maybe one? I bet nothing ever happens over this issue. So you consumers should stay heads up and if you call a business broker because they say they represent a franchise system, you may want to call that franchise system directly if the broker starts trying to coax you into a non-franchise business, especially one which has had more than one owner over the years. Franchising works and there is a reason, it will continue to work as long as it is not killed like so many other industries in America. Look at the devastation out there being caused by horrible policy by the frivolous lawsuits by government regulatory bodies.
To find out which business brokers are the most ethical and which business brokers the top franchises use go to; http://www.Franchising.org.
"Lance Winslow" - If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs
1. Don't Spend Too Much Time PlanningWhen you are entering... Read More
As small business managers, we juggle limited resources in a... Read More
How do you find the best business partners?Finding a good... Read More
We hear a lot of talk about junk mail nowadays.... Read More
The way you manage your money is one of the... Read More
Most small business owners seek advisors who can help them... Read More
TRUTH IN THE LAWN MOWING INDUSTRYWe do not wish to... Read More
If you are a non-operator owner of many work trucks,... Read More
Becoming a contractor or sub-contractor for the U.S. government can... Read More
If you are a franchisee of a large franchise system;... Read More
If you interviewed business owners of failed businesses, a majority... Read More
Shopping for a franchise is easy if you know what... Read More
If you own a mobile car washing, pressure washing or... Read More
Introduction: This article is written as a general discussion on... Read More
Home based travel businesses are no longer the wave of... Read More
Why should you describe your business to others in 5... Read More
Many small business startups fail within the first 2 years... Read More
If you run a pressure washing company in a rural... Read More
Cash is the lifeblood of any business. As humans need... Read More
Would you rather have one good client paying you five... Read More
Here are some of the questions that you need to... Read More
The following are six essential skills to business success. You... Read More
A cluttered world of marketing communications diminishes the ordinary. The... Read More
"I don't know the key to success, but the key... Read More
Mobile detailers will find themselves with lots of competition even... Read More
As an Investment Representative you've worked hard to build trust... Read More
Increase your profit potential by identifying ? and avoiding ?... Read More
One of the hidden perks of raising six children is... Read More
The bad things starts with the letter 'O'?.like Obstacles, Obstruction,... Read More
In today's fast paced marketplace it is easy to neglect... Read More
The restaurant industry in the United States employs an estimated... Read More
The current lack of industry leaders represents an exceptional opportunity... Read More
In the book Women and Small Business author gives all... Read More
The success of your business depends on your ability to... Read More
What is the best time to expand a mobile car... Read More
We were more than excited. Our women's doubles tennis team... Read More
Whether you are an Entrepreneur or Business Professional there are... Read More
Maximum efficiency in the cleaning industry is a key to... Read More
Small Business, Big Business ? What's the Diff?Well a lot... Read More
Many times small businesses want to expand their businesses and... Read More
In today's economic climate, the first priority for the small... Read More
Introduction: This article is written as a general discussion on... Read More
Every employee would like to earn as high a salary... Read More
Search Engines account for almost 90% of all web traffic!In... Read More
Opportunities for home show businesses have never been more abundant.... Read More
There are almost as many opinions and views on marketing... Read More
Pressure washing companies must look for customers in the retail... Read More
I love lists. I make them for everything. And I'm... Read More
Most small businesses simply go about their daily business and... Read More
Everyone loves a good story. Whether it's the story of... Read More
1. Resolve to build a consistent network system.Since referrals are... Read More
As an Investment Representative you've worked hard to build trust... Read More
Forget everything you've ever heard about the U.S. Small Business... Read More
When starting a business, you have to determine the method... Read More
What makes a business relationship?What really makes a business relationship?... Read More
Whether it has been thrust upon you by external market... Read More
Essentially there are 5 tremendously powerful methods to make money... Read More
I believe the number one reason why a business will... Read More
Microfiber cleaning towels have been around for about ten years... Read More
Data. Most people think it is a term relegated to... Read More
New Franchisors and Entrepreneurs need to watch out as they... Read More
Outsourcing is the strategic use of outside resources to perform... Read More
It is estimated that 78% of all small business start-ups... Read More
The goals of businesses have undergone much evolution from the... Read More
"So what?" is a lovely question.It can lead to a... Read More
$elling $elling $ellingWhat makes a great sales person? Well, the... Read More
Small Business |