FSO's versus Brokers

Not just another Lead Referral Network!

 

Many people confuse Franchise Sales Outsource companies with Broker networks, but in fact, they are two different types of organizations entirely.

 

Franchise brokers are, in a legal sense, often referred to as Lead Referral Networks (LRNs).  (For the sake of clarity, we refer to broker networks as a whole as LRNs and the individuals within those networks as brokers.) 

 

The primary role of LRNs is to provide pre-qualified leads to participating franchisors in return for a success fee.
 Responsibilities  LRNs/Brokers  FSOs
 Primary Function  Provide qualified leads

 Take lead through salesprocess

 until a sale is closed

 Number of Concepts Represented

  60 - 200 or more  Generally under 20

 Number of Concepts an Individual Broker or Salesperson Would Actively Promote

 

  60 - 200 or more  1 - 4
 Exclusivity

 Generally non-exclusive.  Often franchisors will have relationships with multiple LRNs

  Generally exclusive
 Reporting Obligations  None  Monthly
 Contractual Obligations  None

 Negotiated levels of annual franchise sales activity specified in contract. 
 Required Marketing

 None, although they may ask, franchisors to attend/sponsor annual conventions.

  Negotiated levels of marketing expenditure on the part of the franchisor included in most contracts.
 Fees  Success fees only, with averages ranging between $15,000 and $30,000.  Some LRNs will try and take a percentage of the royalty as well (we strongly recommend against this).

 Most FSOs will try to take a fee for each franchise sold plus percentage of the royalty.

 

Franchise Dynamics is unique in that it does not take any of our client's royalty.

 Responsible For

 Data Entry 

 Franchisor  FSO

 Responsible For Sending

 Material

  Franchisor/Broker  FSO

 Responsible For

 Pre-Qualification

  Broker  FSO

 Responsible For

 Follow-Up

  Franchisor  FSO

 Responsible For

 Discovery Day

  Franchisor  FSO

 Responsible For FDD

  Franchisor  FSO

 Responsible for

 Document Management

  Franchisor  FSO

 Responsible for the Final

 Qualification and the

 Actual Decision on the

 Award of a Franchise

  Franchisor  Franchisor