In real estate, when opening your own agency, there are a lot of choices about how you will run your business. Fundamental choices that can really define your path and your success.
Do you focus on sales and the big revenue that can come from them? Or the stability of real estate ‘bread and butter’, property management?
What is your commission structure, and will it be enticing enough to attract motivated and energetic salespeople?
Will you specialise in a niche, like developments or luxury homes, or try to win listings across the board?
Perhaps the most important choice, is if you will strike out with your own independent, local brand, OR if you will invest in annual franchise fees to leverage an existing real estate brand.
Many of EAC’s members are independents, but over the 60 years we have been supporting real estate agents, we have seen fluctuations in the industry, in terms of the popularity of the franchise model.
A decade ago, we saw many businesses flocking to the big brands, to benefit from all that they could offer. More recently, we have seen a stronger lean towards boutique, independent and even sole trader businesses.
Given this is one of the most important decisions you will make about your agency business structure, it is not a choice to be made lightly.
Below, we have set out some of the pros and cons of both models, so you can kick off your own research and ensure you make a smart and well-informed next move.
Why become an independent agency?
- Greater control over your business
Most of us don’t start our own business so we can operate under the same restrictions of choice that we did while working for someone else. We want to be able to make our own choices and tread our own path.
As an independent agency, this is exactly what you get. You have full reign over your business name, branding and how it is applied, and your positioning in the local market.
Additionally, from an operational perspective, you have the freedom to define your own pricing, finance and practices.
Franchise models vary, but as an absolute basic, your business brand is controlled by a head office somewhere else.
Everything from the look of your shopfront to how you layout your window cards and mailbox drops is dictated by brand guidelines.
Of course, this can be a big positive – it’s one less thing you have to think about, and it ensures brand consistency – but it does mean your freedoms are greatly reduced when it comes to your business.
As an agency owner, if you’re looking for control, independent is your best move!
- Opportunity to implement the technology of your choice
As an independent, every platform and program you use in your office is 100% your choice.
Again, franchise models do vary, but a feature of some of the more prominent brands is that they dictate much of the technology their offices must use, such as which Customer Relationship Management (CRM) software is in place.
Additionally, some franchises also require contacts from the local CRMs to be made available to the overarching company CRM, meaning they have access to your database.
While this restriction on platforms can actually be a blessing – head offices often have technical experts, who review the various platforms in order to select the right one for the company – it can also be a curse.
Members report in some franchises, the technology that must be used is either very outdated, or not really fit-for-purpose in their specific agency.
If a head office doesn’t keep its finger on the pulse, make tech suppliers accountable and evolve with technology, your agency can find itself falling behind your local competitors, with little choice or chance to catch up.
- No franchise fees
Independent agencies don’t pay franchise fees.
One of the greatest complaints of franchisees is the cost of the associated fees.
With costs and resources varying from one group to the next, it is wise to compare and contrast fees from different groups, and what you get for them.
While certainly, some groups offer bang for your buck, other franchisees complain of steep annual fees, with little return on that investment – just a lot fancier group head office than is actually required.
When considering independent vs franchise, don’t write off the franchise straight away though, simply because of the fees.
First, conduct a comparison between what your costs might be as an independent to set up your own brand, run your own campaigns and advertising, make your own name, vs an annual franchise fee that covers all of those activities for you.
Why become a franchisee?
Though many of our members are independent agencies, those that have chosen the franchisee path often have good reason.
- Benefit from built-in brand awareness
Brand awareness and recall are highly prized in the world of business and are not actually easy to achieve – hence the billions companies spend on marketing every year, so people think of their brand solution first when they have a relevant problem.
When starting your own independent agency, you not only need to select a name and have a visual brand designed, you need to spend money to make sure people know about your brand and recall it as a relevant solution to their real estate challenge.
As a franchisee, the minute you set up your beautifully branded shopfront, locals already know and recognise your brand and have a perception of its reputation.
This is partly because your group head office – with its dedicated and experienced specialist marketing team – has spent years running regular brand awareness campaigns, designed to put your name top-of-mind when people think about real estate.
As a franchisee, you can focus on local area marketing, while your head office continues to build your brand at a mass level, for you.
- Enjoy centralised services
Depending on the group you join, marketing isn’t the only centralised service you can benefit from.
Many small-to-medium independent offices are made up solely of real estate agents and the people who support them. Unlike other businesses, they don’t often have access to qualified HR or operations specialists, and they spend considerable time managing finance.
The level and diversity of centralised services differs from group to group, but select the right one, and your small team of a few salespeople and property managers, could now be backed by carefully constructed operational processes, marketing campaigns, HR initiatives and incentives, and financial procedures designed by experts.
- Training and incentives
Every agent has to undertake some training each year to complete CPD points. Many agents don’t undertake any further training – yet those who continuously outperform the rest are the agents who focus on regular upskilling above and beyond the standard CPD training.
Real estate groups often offer both online and in-person training opportunities, some paid and some free, for the agents employed within franchisee offices.
As a franchisee, you may have the chance to learn about new technology and how to use it, better understand practices being used in other industries that could improve your business, or deep dive into areas like social media management or community engagement, to improve your local reach.
Making the franchise vs independent agency decision is not always an easy one. To get it right, start by thinking about your vision for your agency – where you want it to go, what you want it to be, what standing you want it to have.
Evaluate the skillset of the people you have in your team, or the positions you aim to recruit (if your team isn’t built out yet), to see if you will have the right people to achieve that vision.
If you can do it yourself, and you want that control over your business and branding, perhaps being an independent is your best bet.
If you want to grow quickly and not get bogged down in setting everything up, and you are willing to relinquish some control, explore the various groups, compare and contrast ROI and select one that aligns with your values and vision.