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Is a Franchise in Your Future?

by admin

Real estate is an industry that allows you to be as successful as you’re willing and driven to be. Miami 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.

Orlando Pedrero grew up in Miami and now serves as assistant regional VP for Realogy, the world’s largest franchise company. Pedrero says franchises should be as selective about to whom they sell their franchises as those deciding which franchise to buy.

“It’s a long process,” he explains, citing a six- to eight-week time period. “We’re looking for synergies. Does the agent or broker interested in the affiliation share the same values, vision and entrepreneurial spirit, and are they looking for the systems and tools that will make them successful?”

While it is possible for agents to purchase some components that a franchise would make available, such as training in FSBO or a particular software, they do so with no ongoing support and no record of success for those components in the market in which they work.

The changing market is a good enough reason to at least consider franchise affiliation, but owners must be clear on what they expect to gain and whether it’s worth the price in terms both of financial and personal growth.

“The key is to look at the value,” says Pedrero. “What are they receiving to increase their business? The whole reason to purchase a franchise is to gain them more transactions or market share. I meet people all the time who are considering XYZ franchise and making their decision based on fees.” He notes that costs are similar across the board, and 90 percent of Realogy’s offerings are included in the initial franchise purchase fee.

“The issue regarding cost is what it will cost you if you don’t purchase the franchise, especially in niche markets like Miami,” he says. “Once established, it’s not a matter of cost. If it’s going to cost you a dollar and you’re going to gain three, where’s the negative?”

While Miami franchise owners cite different reasons for choosing their particular franchises, they all agree on some basic tenants of franchise research and what to look for when considering such a move. Pedrero says the best bet when considering franchises is to concentrate on the most recognizable names in real estate as branding is crucial.

“Think of the importance of branding not from the broker’s point but from the consumer’s,” he says. “It’s a very global market. Do you have a brand that’s going to have a national and international market? That’s big in an international market like Miami and South Florida.”

Some find themselves unexpectedly considering a franchise, such as Patricia Delinois, who hit the ground running at age 19 as a new agent with Stadler & Associates. When the company went bankrupt and all the agents dispersed to other companies, Delinois was urged by her peers to open a company of her own. She did so with a Coldwell Banker franchise. Last fall, she made the switch to Century 21.

“Judy Russell, my vice president, and I studied, researched and analyzed our agency’s future over and over again, and we came up with the conclusion that to be the leading real estate firm and to be ahead of the rest, to reach the level we want, we needed change,” says Delinois, owner of Century 21 Premier Elite Realty. “We went from idea to idea and company to company, interviewing some of the country’s best franchises.”

The two had just about decided on a franchise when they were approached by Jose Perez, then VP for Cendant Corp., now Realogy, who urged them to visit New York to learn more about Century 21’s Fine Homes and Estates division. And so, they did.

“We were trying to be open minded, since we had almost already made up our minds about another franchise,” she says. “We wanted the perfect franchise; brand name and national and international exposure were very important.”

Today, the company is able to retain its intimate boutique-like atmosphere while enjoying all the benefits of being a Century 21 office. A key factor that led to Delinois’ franchise choice is her ability to leverage the Century 21 Fine Homes and Estates luxury real estate program (state-of-the-art marketing and technology platforms in particular) to better excel in South Florida’s highly competitive marketplace.

“The unique combination of our extensive knowledge of the local market and Century 21’s expertise and global reach gives us an unprecedented opportunity to reinvent the traditional real estate model used worldwide,” she says, noting the company’s presence in 48 countries, 8,000 offices and 160,000-plus agents.

The fact that Delinois already had a background in real estate was helpful in her case, but all types of business skills and experience can be crucial when opening a franchise. An entrepreneurial spirit and a written plan for success are good starts as are your reputation and image within the agent community where you’ll be recruiting, says Pedrero. The most successful franchises are those led by business-minded people.

“The biggest skill is my knowledge of the business in South Florida, says Susie Lawson, owner of the Keller Williams franchise in Miami. “However, after being in business with Keller Williams for four years, I realize how much more there is to learn,” she says. “I have had to develop my coaching, consulting and training skills. I have a real passion for all of these and, through Keller Williams consulting, I am in the process of mastering these skills. In order to assist our agents in achieving success at a high level, we as leaders need to master our consulting, coaching and training skills. In fact, we have training in our office every day at different levels. For the beginner, who just received their license, to masterminds with mega agents doing in excess of $20 million in sales.”

Lawson worked for a large national real estate company for 12 years. In 1996, she left to open Eagle Realty with partner, David Carlisle. During those six years, the two grew the company to 23 agents and were quite profitable. In 2003, they converted the local company to Keller Williams Eagle Realty. Just over three years later they have grown to over 130 agents. Overall, Keller Williams is the fastest growing company in the United States today, says Lawson, and is ranked No. 4 nationally. The company currently has more than 72,000 agents and more than 700 offices.

“Because of our growth and success, in 2005 we bought the franchise for Miami Beach and that office currently has 70 agents,” says Lawson. “In fact, that office is scheduled to move to their new permanent location on Meridian Avenue in May.”

There are ups and downs to franchise ownership, but Lawson can only see the good in her decision to buy Keller Williams.

“We were surprised at how complete they are with their process,” she says. “We went through an intensive interview process about who we are and that we were a match with their company. They have a complete system and package for success and, as long as you follow the road map, you are assured profitability.”

Lawson and Carlisle had some concern over opening the first Keller Williams office in Miami-Dade, but it didn’t take long for the brand to gain recognition in South Florida.

“In our case, [the upside] was to buy a system for growth,” she says. “We wanted a company that was not only about us, so when I decide to retire, I have a company that is bigger than me. With this particular company, there is opportunity for passive residual income streams that could be more than I ever dreamed possible. My income stream is willable, and after all these years in business I am able to leave a legacy and income stream to my son, his wife and my magnificent grandchildren. That is what working hard is really all about, leaving a legacy.”

The key, she adds, is due diligence when considering which franchise to purchase. “It’s due diligence about who the company really is and what are their core values,” Lawson explains. “It is not an impulsive decision. I am personally very impulsive; however, my partner is very analytical. He kept looking for holes in what they said. After six months, he discovered none and we moved forward. We are still pinching ourselves over our brilliant decision.”

Say Nay
Many who consider opening a franchise really don’t understand all the facets of such a venture. Still others simply have no interest in being affiliated with a franchise.

Tony Cho, owner/broker of Metro 1 Properties, isn’t interested in working under another person’s vision or brand.
“The advantage of doing it on your own is more for people who are more self-sufficient and resourceful, because you have to create everything from scratch,” says Cho, who has 29 agents working for him and is preparing to open a second Miami office this year. “From just a business standpoint, it may be a good decision, but for me, the disadvantages outweigh the advantages.”

The biggest advantage to franchises may be the networking, says Cho, who came into his business eight years ago with a solid networking base that has continued to expand through the years, serving him quite well as an independent owner/broker.

“It’s a challenging business to create your own infrastructure, handle operating expenses and build your company profile and national branding,” says Cho, who specializes in urban redevelopment and promoting sustainable growth and development. “Being independent is a lot more rewarding, but also a lot riskier. You have more overhead and ground work but also more creative control. It’s very challenging, especially in this market.”

Deciding whether to stay independent or purchase a franchise is a decision no one can make for you. But knowing the questions to ask and being able to determine the value you will receive and the difference it will make to your bottom line are crucial in making that decision.

Of course, there are downsides to choosing to affiliate with a franchise, including loss of identity, loss of independence, unexpected costs and flaws in the quality of the system. But careful planning and thorough research can ward off even these perceived negatives and open a whole new chapter of your career in real estate.

Contacts:

Tony Cho
Metro 1 Properties
305.571.9991
[email protected]

Patricia Delinois
Century 21 Premier Elite Realty
305.279.8814
[email protected]

Susie Lawson
Keller Williams Eagle Realty
305.694.5355
[email protected]

Orlando Pedrero
Realogy
407.312.1460
[email protected]

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