Real Estate Franchises: A Viable Business Model for Growth

Real Estate Franchises: A Viable Business Model for Growth

Franchising is a proven business model in numerous industries ranging from food to real estate. The success of well-known real estate franchises highlights franchising at its best: rapid growth, brand recognition, and successful sites. We look at the benefits of franchising for real estate brands and the growth potential it offers.

Real estate and the franchise model

The two main types of real estate business models are franchise and independent. The independent model could provide more freedom, flexibility, and choice. It gives you complete control over things like marketing, promotional style, branding, and operators. You don’t have to pay franchise fees and splits. However, you’re starting from scratch and will need to make a significant financial outlay to establish your own agency. Creating a strong brand can be a major cost and challenge.

With a franchise model, you buy into the single site – a franchise – and the franchisor gives you an instant business model, with ongoing training and support, especially marketing. The franchisor might require you use their systems, like CRMs, along with branding and marketing collateral. In exchange, you as the franchisee might pay the franchisor a fixed percentage (say, 7% to 12%) of your gross income each month, in addition to the initial one-off cost of buying into the franchise. Within the franchise model, you can have further variations like 100%-commission-based agents; basic commission splits between agency and agent; or a mix of salary, company benefits, and profit sharing.

Benefits of franchising a business

Franchising a business enhances scalability by allowing franchisors to take advantage of existing brand name recognition and credibility along with an established customer base to quickly increase the number of sites – with capital input by the franchisee. With a proven business system encompassing everything from marketing and brand to operations and agent-recruitment methods, achieving growth can be faster and more predictable process.

Benefits for the franchise owner

The key benefit of operating a real estate franchise is the opportunity to leverage the franchisee’s capital (through their fees) to expand your business model. If you screen your prospective franchisees effectively, you can ensure you’re working with motivated, capable business owners, which enhances the likelihood of success for each franchise.

You can achieve growth without the risk of wholly owned subsidiaries, since some of the risk is passed on to the franchisee. Additionally, you can focus your time and resources on expansion rather than managing individual sites, employees, and operations. All of this could help you grow your franchise much more quickly.

Benefits for the franchisee real estate agent

As a franchisee real estate agent, buying into an established franchise brand gives you instant recognition among customers. You can leverage brand loyalty and a proven history of service and enjoy immediate trust among the community. You’ll also have extensive support and assistance
+from the franchisor, and a proven business strategy and plan, rather than having to start from scratch. You can reap the benefits of the franchisor’s advertising buying power and introductions to the best suppliers, along with accessing branding materials for lower cost than otherwise.

The franchisor may have done the research into locations and site selection, which will also provide the franchisee with more certainty. You can concentrate on the core business activities and leave important but peripheral functions like marketing to the franchisor. In addition, franchisees can access global reach, enjoy considerable brand exposure, and benefits from years of business-model refinement carried out by the franchisor – all of which could mean lower risk and a greater chance of success for the agent.

Examples of high-growth real estate franchises

Some of the most high-profile real estate firms are franchises with global operations using the same branding, operational, and marketing frameworks.

  • Century 21 Real Estate – Century 21 is one of the oldest and one of the largest real estate franchises in the US.
  • Coldwell Banker Real Estate – Founded over 100 years ago, Coldwell has a presence in 49 countries and territories.
  • One Agency – One Agency has been operating for a little over a decade but its freedom-friendly business model has already seen it become one of the fastest-growing real-estate networks in Australia and New Zealand.
  • EXIT Realty – EXIT is a relative newcomer that is a great example of how the franchise model can drive accelerated growth for real estate operators.
  • Keller Williams Real Estate – Founded in 1983, Keller Williams is another example of how franchising can support rapid expansion.
  • RE/MAX – With more than 100,000 agent affiliates and 6,500 offices across the globe, RE/MAX has demonstrated how a 100% commission model can turbo-charge productivity and expansion in a franchise.

Franchising: a proven strategy for the real estate sector

Franchising could offer measurable and proven benefits for real estate franchisors, franchisees, and the industry as a whole. Real-life examples of global real estate franchises illustrate the potential of the right franchising model for operators in this industry. With the right strategy and brand management, franchisors can achieve accelerated growth while supporting real estate agents in realising their goal of running their own business.

At Baybridge Lawyers, we’re the leading experts in anything franchise related. Whether you’re selling or buying a franchise or considering turning your agency into a franchise, we can assist you through the entire process with practical legal advice and guidance. Contact us today on (02) 9232 3511 for more information.

 

Baybridge

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Christian Bird

Special Counsel | Commercial

Christian Bird brings real world experience to his role as a senior franchising and general commercial lawyer. Christian understands the commercial challenges faced by franchisors having watched his father successfully found and grow a national franchise system that has been in operation for over 30 years. As a result, he is uniquely placed to assist franchising clients with the myriad of legal challenges they face. Christian has experience working with franchisors across Australia and internationally in a range of industries.

Why are real estate agencies so suited to the franchise model? Find out more with this guide from Baybridge Lawyers.