Franchising

Franchising is here to stay. The benefits stemming from joining a franchise are many: affiliation with a larger organization; greater market power from a recognized trademark; cooperative advertising and marketing. By contrast, independent business owners are known only to their local area, are not associated with a larger group, and do not benefit from the economies of scale from cooperative marketing efforts.

Joining a franchise, however, does entail some risks. Depending on the franchise, start-up costs resulting from initial franchise fees and conversion can be costly. Most franchise systems also require on-going payments as a percentage of gross revenues received - called royalties. These fees can vary depending on the franchise and are usually around six or eight percent. Some traditional franchises also require monthly flat fees or transaction fees. Franchise companies audit their franchisees to monitor fee payments. The prospective franchisee must consider all these costs and determine whether the franchise route is the way to go.

Franchising in the real estate industry has been around for many years. Franchisers such as Century 21, Coldwell Banker and Prudential, to name a few. These are traditional companies that have maintained the operation of the franchise as when first proposed the concept. Mainly, pay an initial franchise fee to join the system and pay a royalty to the franchise company on an on-going basis. In return, you run your business under our brand-name.

The real estate industry has changed and the needs of real estate brokers are also changing. Real estate brokers who are seeking franchise affiliation have other, more current franchise methods available to suit their needs. There are now franchise companies that offer a "no frills" approach to franchise affiliation. Since real estate is a service-oriented profession, with no actual product being sold, such as hamburger or gasoline, these new systems are offering a brand-name, and therefore the franchisee is gaining the benefit of being a member of a larger group.

This "no-frills" approach is getting the interest of many veteran brokers for the fact that they are gaining greater market recognition without the burden of paying royalties. Many services that were available through the traditional franchises, such as sales training, are offered by outside training schools and organizations, available at the brokers' discretion. And the success of the real estate office is mostly due to the experience and management of the broker, not the franchise. It is for this reason that no franchise company will guarantee success by joining their franchise system.

As the real estate profession develops, so is way franchising is changing. Some may still opt for the traditional franchise methods; however, a growing and ever-increasing number of independent-minded brokers are now realizing that joining a network will increase their market recognition and, instead, are opting for the more current methods of franchise affiliation, without the burden of higher cost.