By Jim Merrion
Over the past 25 years, franchises have become the dominant national brand names in most fields, including residential real estate. In Chicagoland, four of the five largest residential brokerage organizations, in terms of listings sold in 2006, were franchises: RE/MAX, Coldwell Banker, Century 21 and GMAC. What’s more, those organizations accounted for 48.3 percent of sold listings last year, according to data from the Multiple Listing Service of Northern Illinois.
However, non-franchise brokerages still sell nearly half of the residential listings in Chicagoland, suggesting that both franchised and non-franchised businesses have distinct appeals to both agents and consumers.
The lure of real estate franchises is, in many ways, similar to that of a franchise system like McDonald’s. Both offer entrepreneurs the opportunity to identify their businesses with respected brand names that offer instant credibility. And, just as you don’t have to be an expert on hamburgers to open a McDonald’s, you needn’t have years of experience managing a real estate brokerage to start your own RE/MAX office. In both cases, the franchising company provides extensive guidance and support that can be invaluable to franchisees, whether they are rich in real estate experience or relative newcomers to our industry. Prior success in another career may well transfer to the field of real estate.
The popularity of real estate brokerage franchising reflects the growing importance of brand names and Internet-based lead generation in our industry today. Franchisors spend millions of dollars promoting the brand and building a strong, sophisticated web presence. Given our mobile society, dollars spent promoting the brand in one state can benefit offices and agents in many other locations.
Purchasing a real estate franchise continues to appeal to a progressively wider audience.
In years past, real estate franchisees typically fell into one of three categories:
• Established broker/owners converting their independent offices to franchises
• Reasonably successful agents with a desire to start their own offices and create great working environments for themselves and other agents
• Top producers who wanted complete independence and felt the best way to achieve that goal was with their own “branded” offices.
Two other groups have joined those traditional types of franchisees. One new group consists of recent migrants to the United States who see franchise ownership as a logical path to pursue their ambitions of business ownership. First, generation Americans from Asia, Europe, the Middle East and Latin America all have purchased RE/MAX franchises in the Chicago area in the last several years.
New franchisees from other cultures often focus on serving their ethnic communities. Becoming part of a well-known national real estate organization gives them the flexibility to maintain their niche focus while connecting them to a recognized brand name that offers sophisticated tools and resources. At the same time, it can help them attract a more diverse group of agents and consumers.
A second new group of franchisees we are seeing frequently consists of those who have backgrounds in related businesses, such as mortgage lending or real estate development. These business professionals, having worked with real estate agents for years, often have a distinct perspective on how they would operate a real estate office. They may also see it as an extension of their other business endeavors. A former mortgage broker, for example, might open a real estate brokerage to capitalize on strong ties to a large client base.
Of course, no two real estate franchises are exactly the same, so deciding to associate yourself with one requires thorough due diligence. It’s important to understand what each franchise offers, what it demands and how it differs from the others. Key considerations are what the franchisor does to help recruit and retain agents and whether it has the kind of established Internet presence that will generate a viable level of business leads. Having an attractive brand is important for both purposes. For the potential franchisee, the key is to find an organization that gives the training and support to needed, while offering the freedom to excel at those things he does best.
Jim Merrion is regional director of RE/MAX Northern Illinois.