Many independent brokers have affiliated with any one of the several franchise offerings available today. The reasons for affiliating are many but the main reason an independent business owner would join a franchise is to attain Greater Name Recognition. This is true for franchising in any industry, let alone real estate. Why is the Subway sandwich franchise a success? If you want to open a sandwich shop, do you need a franchise to instruct you how to make a turkey hero? I don’t think so. When you buy a Subway franchise, you are buying rights to a trademarked name and you are paying a franchise fee and a royalty to own these rights. In return, everyone is familiar with that brand name and knows what to expect when you visit the franchise store.
In real estate franchising, independent brokers are getting that greater market power by affiliating with a franchise. But this is a service-oriented business and it is actually the management of the independent office that is responsible for the success of the business. Unlike retail franchises that offer a standardized product which is packaged specifically for that business, a real estate offices’ success is a function of the quality of its management and sales organization. There are many top offices in any area that are independent.
Many of today’s traditional franchise systems require very high start-up costs including initial franchise fees generally ranging from $10,000. to $25,000. or more and total start-up costs requiring up to $200,000, depending on the franchise. Expect to pay a 8% royalty on average on top of that for each sales closing with many traditional systems requiring minimum monthly fees and or transaction fees just for being a member.
Traditional franchise systems will audit their franchise members to assure that all these fees are paid. NO FRANCHISE SYSTEM WILL GUARANTEE THE SUCCESS OF ANY FRANCHISE MEMBER.
There are some new, non-traditional, innovative franchises that could be rising stars. As the real estate industry matures, so is the real estate agent. Today, the average age of a broker/agent is in his or her fifties and most are very experienced and do not need beginner training. It is because of this changing face of the industry that the new systems are being developed which offer “no-frills” approaches at much less cost.
As the age of the internet continues to grow, it will remain as the top research tool for consumers of any product or service. For the Real Estate office owner, securing a protected trademark in is almost impossible with the thousands of business names being rejected due to similarity with other, existing names. Unless the business owner has a budget of millions of dollars and can coin a “made-up” name, such as “Google” or “Yahoo” a low-cost real estate franchise could be your answer.