….well…9 predictions about the market and 1 prediction about the Eels winning the 2019 NRL premiership which most would have to agree, is simply a foregone conclusion. 😊
One of the other predictions I’ve made this year is that there’s a trend of real estate agencies abandoning the franchise model and moving towards a completely independent operation.
In the United States and throughout Europe, this trend has taken effect for quite a number of years now and even in NSW and Victoria, it is more prevalent than it is here in Queensland.
So why do I believe this trend will emerge?
Years ago, sellers were more inclined to list with a particular agency based upon their results, office position or reputation.
These were the days prior to the internet and buyers would walk into an agent’s shopfront to talk to a salesperson about what sort of property that were looking to purchase.
Back then, the agency had the profile and held all the cards…and the salespeople were employees rather than business people running their own companies.
The business (whether it be the buyer or the seller) was often handled by the person who was on ‘roster’ at that particular time.
Today (more than ever before), sellers seek to engage an individual agent (rather than choosing to list their property with an agency) and this is often based upon a personal referral, recent sales results, reputation etc.
Sellers will usually contact the agent/s of their choice directly to arrange a time to meet with them and will then choose which agent will handle their sale.
As you know, many buyers contact the listing agent directly and don’t make any contact with the agency whatsoever.
So today, the reputation, marketing ability and negotiation rely heavily upon the individual agent and as such, the brand behind the agent is reasonably irrelevant.
The large franchises might have designated territories and might offer a ‘pitch’ that they work together to source buyers, but unless neighbouring franchises are owned by the same person, I can tell you that local franchises from the same network are often more hostile towards each other than local real estate offices from a different company.
So, what are the advantages for a seller in listing with a franchise?
The truth is that there are none.
And what are the advantages of owning a franchise instead of an independent agency?
In days gone by, a franchise group had systems, training and resources that were hard for an independent company to compete with but nowadays, all these things can be outsourced at a lower cost than the respective franchise fees.
Despite what many people may think, running a real estate business is a very expensive operation and like many small businesses, many of these offices often run on a profit margin of 10-15%.
As a business owner, if you’re paying 5-10% of your turnover in franchise fees, it is easy to see that you could be losing 50% of your potential profit to the franchisor…and what many business owners often ponder is…
“Am I getting value for money by being part of a network when it costs me so much money?”
When you also add into the equation that the franchisee often has a ‘territory’ that they must not cross (even if it is not written into the franchise agreement, there are often expectations about where an agency can market themselves) and also the very fact that the agents must adhere to strict corporate marketing guidelines (which many agents find a limitation), it is easy to see why plenty decide to go it alone.
To be honest (and in my experience), the only reason many don’t leave the franchise model is that they have never worked outside of a franchise model and are fearful of what lies ahead.
But when there’s such large amounts of money at stake, this is often the determining factor that affects their decision moving forwards.
I can’t begin to count how many times I’ve had a call from a franchise owner (some of them from different parts of Australia) confidentially asking me about my experiences in moving from a franchise to an independent model.
Given I worked for and operated independent companies for my first 7 years in real estate, it’s in my DNA to work this way and it was never a fear moving into this model when we started ‘Innov8 Property’ more than 3 years ago.
Like any prediction, only time will be the judge.
Until next week, Happy Listing & Happy Selling!