FSOs vs Brokers

It’s Not Another Lead Referral Network

Many people confuse Franchise Sales Outsource (FSO) 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
LRN’s/Brokers
FSO’s/Brokers
Responsibilities
  • Primary Function
  • Number of Concepts Represented
  • Number of Concepts an Individual Broker or Salesperson Would Actively Promote
  • Reporting Obligations
  • Contractual Obligations
  • Required Marketing
  • Fees
  • Responsible For Data Entry
  • Responsible For Sending Material
  • Responsible For Pre-Qualification
  • Responsible For Follow-Up
  • Responsible For Discovery Day
  • Responsible For FDD
  • Responsible for Document Management
  • Responsible for the Final Qualification and the Actual Decision on the Award of a Franchise
LRN’s/Brokers
  • Provide qualified leads
  • 60 – 200 or more
  • 60 – 200 or more
  • None
  • None
  • None, although they may ask, franchisers to attend/sponsor annual conventions.
  • Success fees only, with averages ranging between $15,000 and $30,000. Some LRNs will take a percentage of the royalty as well (we strongly recommend against this).
  • Franchisor
  • Franchisor/Broker
  • Broker
  • Franchisor
  • Franchisor
  • Franchisor
  • Franchisor
  • Franchisor
FSO’s/Brokers
  • Take lead through sales process until a sale is closed
  • Generally under 20
  • 1-4
  • Monthly
  • Negotiated levels of annual franchise sales activity specified in contract.
  • Negotiated levels of marketing expenditure on the part of the franchisor included in most contracts.
  • 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.
  • FSO
  • FSO
  • FSO
  • FSO
  • FSO
  • FSO
  • FSO
  • Franchisor