Meta: Ever dreamed of owning your own brokerage? A franchise gives you a place to start with an established name.
Promo: Buying a franchise can be expensive but potentially lucrative over time.
You've probably seen signs for nationally recognizable real estate brokerages in your town, but what you may not know is that a lot of individual brokerage offices are franchises. Many real estate brokerages offer franchise opportunities for people who are interested in owning a brokerage. In some cases, you don't have to be a licensed broker to own a brokerage, although depending on your state, you'll likely have to partner with a broker who can serve as your broker of record.
Starting a brokerage is a big decision. In order to have a successful brokerage, you'll need to be in an active market and hire experienced agents who hopefully already have an existing client base. You'll also need support staff, including marketing and transaction coordinators. You may also need to rent an office, although that isn't always the case in today's market.
Advantages of owning a franchise
A franchise has some key advantages over starting your own brokerage brand. You won't have to worry about building a brand; rather, you'll be able to tap into existing name recognition and gain access to marketing materials. Keep in mind, however, that you'll be required to make sure your marketing matches corporate standards.
A recognizable brand can also make it a lot easier to recruit agents. Agents are more likely to want to associate with a brand that they think will grow their business. Having active and productive agents is key to a brokerage's success. Many brokerages also have recruiting plans that can help with this important task.
Another option is to buy an existing franchise. "What is riskiest is starting with no agents," says Larry Schottenstein, broker-owner at RE/MAX Revealty. "Purchasing would resolve that problem; the difficulty is finding a brokerage you could actually purchase. The franchise is designed to speed up the process of building a brokerage. Recruiting was difficult as an independent broker, and after 3 years of purchasing our RE/MAX franchise we now have 74 agents."
Fees for real estate franchises can vary depending on the individual brokerage package. Becoming part of a franchise may make it easier to get a business loan, but a lot will depend on your credit history and business plan.
Another important thing to consider is backup. When you own your own brokerage, you are on your own with legal concerns. The buck stops with you. When you have a franchise, you may have the benefit of additional leadership as well as legal support if problems should arise.
Disadvantages of owning a franchise
The biggest disadvantage of owning a franchise may be the lack of freedom. You'll be required to use the company's colors, logo, and branding on your website and marketing materials. There may also be requirements as to the type of office and the size of your business. You'll be required to pay royalty fees on a regular basis and to provide an accounting of your business.
Getting started with a franchise can be expensive. In some cases, the fees are under $10,000 to start, but they can also be well over $25,000 depending on the franchise. Most franchise agreements are for a set term that usually starts at five years. Depending on your agreement, you'll be charged a fee to renew your franchise.
Another factor is the desirability of building a local brand. National franchises have name recognition, but they may not be desirable to some consumers who want to work with an independent brokerage.
"While some may feel like they lose their individual creativity, that's not the whole truth," says Sarah Zdeb, a broker/owner at JP & Associates Realtors. "The benefits of collaboration, structure, and exposure provide you with a solid foundation while allowing each location to create their unique culture. That definitely outweighs the expense and time needed to do everything on your own."
The Millionacres bottom line
Once you've decided to own a real estate brokerage, it's important to determine why you want to do it. Consider if you'd rather have your own identity and build a company or if you'll feel more secure by associating with a brand.