Is a Franchise in Your Future?

by Chicago Agent

Real estate is an industry that allows you to be as successful as you’re willing and driven to be. Chicagoland is full of satisfied agents, whether that means an annual income of $70,000 or $7 million. Some agents want to be busy but not swamped, committed but not consumed. Then you have the franchise owner, who seeks a prime position in this competitive industry and is willing to work for it. As long as you are discriminating and careful about the franchise you choose to purchase, and persistent in learning to manage the system you buy, you can breed unlimited success for you and your employees.

By K.K. Snyder
Globalization and technology are changing real estate markets quickly. These market changes translate to necessary adjustments in the way you do business, which sometimes can cause an owner to consider affiliating his company with a franchise. And, while that safety in numbers has a strong appeal to some, others don’t want the affiliation, rules and regulations, standard operating procedures and related baggage that come with being part of a franchise.

The country’s residential real estate franchise companies are seeing healthy growth, according to a REALTOR magazine survey. Many of the national and regional franchisors surveyed posted gains in franchisees. Of the three Cendant brands, Century 21, Coldwell Banker and ERA, Coldwell Banker led the pack and the national franchises, reporting 150 new offices and 14,700 new associates in the past year. Those additions bring its totals to 3,400 and 104,900, respectively.

Potential franchise owners must have clear expectations regarding what they expect to gain and whether it’s worth the price, both financially and personally. Real estate franchises are prevalent in Chicagoland. Weichert Realtors, RE/MAX, Real Living, and Exit all have a presence, among many others. And, while the owners site different reasons for choosing their particular franchises, they agree on several basic tenants of franchise research.

“Instead of scrambling around to assemble your own systems, which can take longer and likely include some costly mistakes, a franchise allows you to acquire a proven marketing and business development platform to grow your business efficiently,” says Joe Magliochetti, co-principal of Real Living Helios Realty with his brother, Andrew.

With 2,162 agents, Real Living is the largest independent real estate firm in the Midwest. The company ranks No. 4 among top real estate companies in the nation by transaction sides. The Magliochettis just opened a third office and employ 40 agents.

“But, it’s important to select a franchise based on the strength of the tools, technology and training resources that it will make available to share with your people,” says Joe Magliochetti. “If you choose the wrong franchise, you’re not doing yourself any favors, and you’ll end up with agents that are lacking the tools to run their businesses.”

For example, some franchisors stress the variety of fees a broker can collect from his agents, or the range of downline residuals franchise owners can create.

“This stuff clouds the real issue,” he says. “If everyone is waiting for residuals, who is serving clients? The purpose of the broker is to serve his or her agents, and to put into place the systems and opportunities to help each agent grow their personal business. Your franchise should serve this purpose as well.”

The brothers were careful to look from every angle at the deal Real Living proposed, focusing on every detail so they wouldn’t be surprised by anything at a later date. Today, the two concentrate on supporting their agents and providing everything they need, before they know they need it, says Andrew Magliochetti.

Mark Zipperer, owner-broker of RE/MAX Edge, took an inside approach when he choose to purchase a franchise. For two years, he worked as a RE/MAX agent and was sold on the company’s international success and No. 1 ranking in the Chicago market. When he decided to venture on his own, the answer to which franchise to purchase was obvious.

“I liked RE/MAX’s reputation and the franchise equation,” says Zipperer, who currently has 12 agents and plans to grow to 50. Among the highlights of RE/MAX franchise ownership is the company’s online lead source, Lead Street, which provides agents with free leads.

“I’m also an agent and sell $8 million to $10 million a year, so those leads are important,” he says. “Because of RE/MAX’s worldwide success, we have resources like that to keep us ahead of the market.”

Referrals are crucial to success in real estate, and the international name recognition of RE/MAX allows Zipperer and his agents to focus efforts and resources on providing quality customer service, rather than spending years to brand an independent office, he says.

“Who doesn’t know RE/MAX? They like, trust and understand it because we’re internationally know,” Zipperer adds. “Think about the investment and what type of clients you want to attract. When opening a firm, you also have to determine what your agents are going to be attracted to.”

Because RE/MAX allows agents to retain more of their commissions, they are able to earn the same amount of money while dealing more intimately with a small number of clients, says Zipperer, noting yet another benefit that helps him recruit agents.

Last fall, Jeff Ristine came out of his role as managing broker of a boutique firm and purchased a Weichert, Realtors franchise with his business partner of eight years. “We were looking to grow the company, and the franchise business format gives you a template for operating your business,” says Ristine, who also had a background in asset management and commercial sales and dispositions. “The franchise template business has a success rate of 95 percent versus the 50 percent failure rate of individual businesses.”

That recipe for success is what drew Ristine to Weichert during his research phase. He knew he wanted a model that would allow him to provide consistent value to his customers. “When evaluating which franchise you want to go after, find one that has thought through everything you’re going to run into,” he says. “All that’s left for the franchisee to do is learn to manage the system. You don’t have to reinvent the wheel, just learn how it works.”

Since launching its first independently owned and operated franchise in January 2002, Weichert Real Estate Affiliates has grown its franchise network to include more than 6,300 sales associates in 29 states. Much of that success is due to the company’s system and diligent franchisee training programs. Today, Ristine has 18 agents in two offices in Wheaton and Downers Grove.

“Weichert has a very good training program at their management academy to teach you the multi-level system,” says Ristine, noting that he learned the Weichert system of recruiting, business management, sales management and how to coach and mentor agents.

For those considering a franchise purchase, Ristine advises: “Make sure that you’re actually getting something,” he says. “There’s the initial cost of buying in, but also ongoing residual of royalties fees based on gross commission.”

With nearly 25 years of combined experience in the real estate industry, Michael and Dena Rychtanek purchased an Exit Realty franchise last December. The national appeal of a recognizable company is what attracted them to being franchisees.

“Owning a franchise brings us to the next level when it comes to networking,” says Dena. “It affords us a coast-to-coast networking database that isn’t within our reach as agents. If we ever have a question about a procedural or administrative issue, we’ve got the answer a phone call away.

The skills and experience brought to the table can be crucial when opening a franchise. Joe Magliochetti, who holds an MBA from the Kellogg School of Management, brought a background in branding, marketing and public relations as well as commercial and investment real estate brokerage. Andrew Magliochetti has a background in commercial brokerage and spent several years as a partner in a development firm specializing in adaptive reuse and redevelopment of commercial and mixed-use properties.

“Together, we bring a financial, development and investment expertise to bear on our brokerage operation, which is especially important in a market like Chicago,” says Joe, noting that Real Living now sells one franchise a week, up from one per month last year. “Our management team adds some great experience in residential sales and marketing as well as in employee training and professional development.”

The brothers say that while their business-planning process has improved with ownership of the franchise, there is always work to be done and knowledge to acquire. “That’s something we’ve been able to filter down to our agents, each of whom completes a detailed business plan each year,” says Joe. “Every business owner should be able to speak the language of accounting, and that’s something we’ve improved upon. In general, though, we are learning and implementing new tools and systems every week. If you’re not constantly changing and adapting new resources, you’re probably falling behind the competition.”

Buying a franchise will rarely be without challenges, but the Rychtaneks and their broker, Albert Zaucha, have handled everything in stride, including staffing issues, assuring the office is profitable, paying added bills, focusing on the success of each agent, ensuring all legal standards are being met, having sufficient resources and coming up with creative ways to motivate agents.

“Exit has an awesome franchise support system,” says Dena. “If we ever have a question about a procedural or administrative issue, we’ve got the answer a phone call away.” More difficult is assuring all of the agents understand the corporate vision for the company and understand the role of a franchise, she adds. Many who consider opening a franchise really don’t understand all the facets of such a venture.

“I understand the value of a franchise and considered opening my own real estate company,” says Zipperer. “But many don’t understand the regulations that an office has to abide by. There’s a lot of time and effort that goes into opening a real estate office and, while the financial equation might be better, there is more expense.”

Another challenge in the franchise business, adds Michael Rychtanek, is distilling and articulating the franchise system in order to share it with the rest of the team.

“One of the challenges we had initially in the franchise selection process was that after we met with a lot of franchisors, we realized their philosophies didn’t match up with ours,” says Andrew Magliochetti. “Another challenge was bringing a new brand to the market, especially in a market as competitive as Chicago. But that disadvantage became an advantage, because people are always looking for the next new thing. It’s your own business…you’re able to leverage an incredible amount of time, capital and research that a larger corporation has already spent and continues to spend on our behalf.”

There still are many downsides to affiliating with a franchise. Some of the possible detractors include loss of identity, loss of independence, unexpected costs and the quality of the system. Therefore, careful planning and thorough research are paramount in warding off these negatives. C.A.

Andrew Magliochetti
Joe Magliochetti
Real Living Helios Realty

Jeff Ristine
Weichert, Realtors

Michael and Dena Rychtanek
Exit Team Realty

Mark Zipperer


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