The Current and Past Options:
Franchise brokerage started around 1987 as a resource for individuals to help find the “right” franchise opportunity. Since then there has been a variety of technological and other innovations that now offer individuals interested in becoming a franchise broker more choices. The competition and/or choices focus on primarily three options.
1ST OPTION: “ROYALTY CONCEPTS”
Over the course of the next decade following 1987, several organizations (including franchise concepts) were created offering training and a variety of support services that were much too expensive for individuals to provide on their own. In return, these organization often charged a “royalty” or “percentage” of the fees collected, typically ranging from 10% – 25% (affiliate programs with some of these groups charge as much as 40%).
Investment costs were typically over $50,000 in addition to requiring members/franchisees to pay for royalties or other fees. Some contractually locked individuals to these agreements with non-compete clauses preventing those individuals from going out on their own. These groups still exist and some provide good training, but many brokers are choosing other options (below) when their agreements expire to avoid losing a large percentage of their commission or the referral fee.
2ND OPTION: “BROKER MILLS”
During the last decade, we started to see groups usually headed by one or two individuals who would offer franchise training to “NEW” brokers. These were often started by an experienced broker(s) who would train you to become a broker for a “one-time” fee (typically $15,000 – $30,000) and no ongoing fee – creating a scenario where there were eventually no financial resources to support the previously trained broker. Unfortunately, these groups often had and still have short lifespans.
There has also been an attempt to charge a lesser fee ($7,000 – $15,000) and charge a royalty… these programs haven’t been very popular. They are often recognized by short training courses (less than 15 hours) claiming to make you an expert and often have virtually no “employee staff” relying on independent contractors to provide much of the training and very limited support resources. The industry is now littered with a large number of failed or failing so called “Broker Training Groups”.
3RD OPTION: “FLAT-FEE ASSOCIATION”
This concept is regarded as the “Next Evolution in Franchise Brokerage Groups”. It’s a hybrid of other options offering lower costs to the broker but ongoing income to support and encourage ongoing support and franchise education. This concept allows the broker to keep 100% of their commissions and charges the broker a flat monthly fee for the support services. As such, the association is required to “earn” the monthly fees that are paid by providing superior support services to justify the fee. At any time, the broker can decide to stop paying and end their membership.
They often charge a one-time training fee that is often significantly less than choices found in the 1st Option and don’t have the restrictions in either the length of the agreement, non-compete, territory size or the ability to keep all of the contracted commissions. As such, many experienced brokers are migrating toward this option. New brokers are finding it financially beneficial along with having many other benefits. The franchise training programs are significantly superior to choices found with the 2nd Option organizations. The support, technology, and many other benefits are supported by a large number of seasoned brokers joining this type of organization. This experience is also helping to provide a superior network of experts who help to train and educate both new and experienced brokers and shorten the ramp-up period often seen with other organizations.