2015 AFDR Highlights: How Franchisors Are Using Brokers
This newsletter continues to present highlights from the 2015 Annual Franchise Development Report (AFDR). The 2015 AFDR is based on responses from 139 franchisors representing 36,313 units (32,693 franchised and 3,620 company-owned). This week: how franchisors are using brokers.
- Usage. About half (49 percent) of respondents in the 2015 AFDR reported that they use franchise broker networks (78 percent used broker firms and 74 percent used independent/local brokers or consultants). That compares with 48 percent in 2013, and 44 percent in 2012.
- Cost. The average commission fee per deal in 2014 was $15,146 from broker firms, and $11,750 from independent brokers/consultants. However, in the experience of the panelists – top franchise sales pros – who discussed the findings at last fall’s Franchise Leadership & Development Conference in Atlanta, those numbers seemed unrealistically low. “I don’t know a single franchisor paying less than $25,000,” said Tom Wood, president and CEO at Floor Coverings International, unless they were in packages of five. “Just signing up with a broker isn’t enough,” added Art Coley, former president and CEO of AlphaGraphics. “Take them out to dinner. Make them understand what your brand is about.”
- Investment level, sector matter. Brokers are not for everyone. They will perform better or worse depending on a brand’s investment level and the sector they operate in. On average, respondents expected to close 11.3 deals through broker firms and 8.3 deals through independent brokers/consultants in 2015.
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