Former franchisee
This week I changed my real estate brokerage affiliation from a franchise and am now an independent. I’ve done a lot of soul searching about which path to take, and suffice it to say that at the end of the day, I see more value in my own name and my brand, than any franchise. Perhaps I should have gone down this path from the start, when I opened up, but that’s water under the bridge.
In cleaning out some files, I found a business card folder from the summer of 2007, when I attended franchise training and also a broker-owner conference. I was on a high, ready to set the would on fire, and collected a number of business cards from other broker-owners that summer. When I flipped through the cards, I had the brainstorm that I’d see how many were still in business, almost five years later. How many were still with the franchise, how many closed up shop, and how many switched affiliations? The answers may or may not surprise you.
What has become of other franchisees?
I had 25 cards in my file. That’s not a huge sample, but I think we can still see some trends from my random collection of cards. I googled every name to see if I could track them down.
The people to the immediate right and left of me were at franchise training were still in business, but had dropped the franchise and gone independent.
Four of the names in my book showed up nothing in google searches. I assume they had dropped out of the business completely. I know that one of them was out of business within 6 months (I had heard that right away, as it spread through our grapevine) so I knew I wouldn’t find him.
Five of the brokers in my pile of cards were still with the franchise. I noticed that three of those five were longer term brokers, whose cards I had picked up not at franchise training but at the conference.
Four had switched from one franchise to another (most notably, Keller Williams gained the most convertees, which confirms NAR statistics published each year about franchise growth).
The trend to go independent
But the biggest trend was in dropping the franchise to go independent. Fully 12 of the names in my stack pulled up in searches at independent offices not affiliated with a national name.
I’ve read numerous articles about the value of the brand, the value of being affiliated with a major national (or international) company. I’ve worked for a franchise office, I’ve owned a different franchise office, and after 11 years in this business, I just don’t see the need to push a corporate logo over my own brand.
You, the agent, either sell the buyer/seller client on you and your services, or not. There are great offices with Brand A or B or C and there are ones down the road that, to be honest here, suck. It’s not the logo the client buys into, it’s you the agent or you the broker. It’s Brand “Agent”.
At the end of the day the client only wants his problem solved: find me a house or sell my house. The logo on that sign should not matter more than the agent who puts the sign in the ground. Exceptional communication skills, solid knowledge of the market, and top notch marketing matter more than that logo.
A personal business decision
To argue the franchise side, they’ll say that they provide systems, tools and support to help the broker succeed. That is true, and if it were not then no franchise would succeed. The question is are you using those tools or not? Is the support really there that you need? Do you want or need their systems or do you have your own in place?
I am not sorry I affiliated with a franchise five years ago. I consider the price I paid to be my MBA in real estate brokerage. Affiliating gave me the courage to go out on my own, and in the beginning, I did take advantage of programs and tools to help me get running. But as time went on, I realized that my own office was morphing more into “my office” and I did not need the franchise support.
I would surmise many of the brokers who de-franchised in the past few years did it because of the money factor — to save money. That’s part of my decision as well. I run a lean operation and see how being independent will benefit our office with less fees for agents to pay, freeing up marketing dollars.
I listened in on a seminar the other day and the speaker said 50% of all new agents drop out within the first year, and 75% within two years. I’m happy to see that new franchisees failing are not at the 50% level, but the numbers above are sobering. I would say owners of franchises should be paying attention to the trends to un-affiliate.
Tannis Engel
February 5, 2012 at 3:04 pm
We opened our independent brokerage two years ago. It has been a huge success and we would never look back. Our clients love it, none of our business dropped off. We have had great success with recruiting new and experienced agents and they have had the same great response from their clients.
We had all of the same questions and concerns when we left the franchise company we worked with but we took a chance andbit was definitely the right choice for us.
Esmeralda
January 26, 2016 at 12:56 pm
As a new agent wanting to be independent what would you recommend I do? I’m in california?
william suarez
May 26, 2016 at 12:37 am
Hello Esmeralda. What part of California are you in? You say new agent wanting to be independent. Do you hold a brokers license or just a sales license? When you mean independent, do you you mean to work alone without a broker? If you hold just a sales license then you have to hang your license with a broker.
Jim Flanagan
February 5, 2012 at 3:30 pm
Erica,
Interesting post! "Systems, tools & training" were the reasons we originally franchised over 25 years ago. Much has changed in that time.
I considered "independence" upon our last renewal; it was the peak of the market and technology was leveling the playing field. My ego was pushing me one way and my "gut" was playing it conservative. My gut won and the market fell out a year and a half later.
A franchise brand will never replace an agent's knowledge, skill and experience but with one third of our industry turning over annually, and the challenges all brokerages faced over the last 6 years, there is "safety" in numbers. And, personally, I believe the "market correction" woke up our brand to the reality that it is the agents and brokers who feed their families!
Today's technology has commoditized all the real estate brands, one way or another, and the individual broker and agent must identify and market their own "unique selling point" to win the client. The power of the franchise has shifted; from a "closer" to an "opener". The majority of the agents, in our market, would not have an opportunity to pitch their "USP" without the brand's introduction.
Should the compensation structure of the franchise agreement be re-evaluated? Maybe. As brokers, and agents, our "service fee" is challenged daily.
Time is the great equalizer and the best teacher. We shall see what the next real estate "frontier" offers.
Much success to you and your independence,
Jim Flanagan
Jeff Brown
February 6, 2012 at 12:34 pm
Hey Jim — I'd appreciate your answer, along with Erica's answer to these questions.
Setting the franchise/independent debate aside, is the real root of the problem the underlying agent-centric business models BOTH are now employing? Isn't agent compensation the reason most large firms, franchise or not, have bought into title, escrow, and mortgage firms? Do you think the broker-centric models (from back in the day) teams are using so successfully are more conducive to long term success?
Thanks
Matt Thomson
February 5, 2012 at 3:37 pm
Great thoughts. Each person is going to be different, for sure. You hit the nail on the head when you ask if folks are using the tools that are provided by their franchise.
Personally, I can't imagine ever leaving Keller Williams. I could never recreate what they give me, and I get the feeling of being independent and branding my name, not theirs.
At the same time, I often wonder why some people who are with us choose to be with us. They don't take advantage of any of the training, systems, tools, anything that we offer.
For them, independent wouldn't work either, thus the rise in 100% brokerages that charge nothing and offer nothing.
Best wishes on your journey…for some I believe it's a fantastic choice. For others of us that need a little more guidance, I couldn't do it!
Matt Warmack
February 5, 2012 at 4:40 pm
Good story.
I think what you are running is very similar to the Keller Williams model – you just are not inside of a Keller Williams office. The research shows that the team brand is much more important than the national brand. I run Urban Abode Group within/powered by Keller Williams, but most of my clients only know me as Urban Abode Group as that's the most important brand. As a team owner I only have to worry about my team/group recruiting & hiring and not the office staff – at the end of the day that makes me happy to know I don't have to worry about the office staff.
Jeff Brown
February 6, 2012 at 12:39 pm
Hey Matt — My guess is you pay your team members, especially the buyer-agents significantly less than typical brokerages. I also infer your model is by design or default broker-centric. That is, your efforts supply leads, and therefore the agents under you gladly benefit from those leads, and make more than their 'independent' counterparts who oft times are paid double or more the commission split.
Erica Ramus
February 10, 2012 at 9:39 pm
Hey Jeff… and Matt. Interesting posts. I guess I am old fashioned broker centric. I provide the name and the leads pour in. I am the rainmaker. I pass on all leads to the agents. The only ones I "work" are personal friends or past clients of mine. I bring in the leads and pass them on. I am here to supervise and intervene if someone needs me. I don't do title/escrow etc as other firms have. This has pissed off other lawyers and firms and in fact has brought us more business as we are the fiercely independent firm who does NOT have that in house. It works for us!
jay Great Falls
February 5, 2012 at 6:00 pm
Generally…franchise shmanchise. I highly recommend looking into opening your own brokerage, but not from scratch.
Being indie rocks for the hyper independent. It's rare to get anything of value from a franchise as the consumers care about the authority of the agent–not what logo they have. And by the time you go solo do you really need "training?"
The costs of running your own show are so small as a legal business address/virtual office is just $200/month is most markets. I used to pay $1300/month for my 100% split. Now the same brokerage only offers 95% for the same fee (different franchises have their own monthly fee though and some are much lower).
Open a JustNewListings.com Realty in your market–not as a franchise but with a license to use the name and more importantly to use the high powered google juiced up domain JustNewListings.com/your-state-city-real-estate. Putting a google indexed IDX on your spot of the justnewlistings.com domain gets you rankings for address and community keyword searches, etc. much faster than starting from scratch.
And I've finally opened up to letting agents who do not want to open a new brokerage to put their IDX on my domain and approval of their board and broker for a very small referral fee. I think most associations will accept that justnewlistings.com/state/city/real-estate is like leasing a condo in an office building. You get a little piece of the building /state-city-real-estate but it is still yours to do with what you want and has only your broker info on it and or blog and IDX.
This is the agent's response to 3rd party sites like Trulia hogging the search engine rankings. Local agents should rank for keywords of all sorts–not 3rd party sites. And my PR 6 domain is a great way to achieve this and the costs are much lower than a franchise with a "recognized" company.
The newest JustNewListings.com Realty office is being opened in Wilmington, NC this Spring and then in Charleston, SC end of year . rough draft of Wilmington without the IDX feed yet is here for example: https://www.justnewlistings.com/north-carolina-wilmington-real-estate.html
I'll write and video about this on Active Rain soon. But we need an agent response completely local and independent agent by agent in each market and I see my domain headed this way.
The big question is whether to convert the site to WordPress or keep it on the REW (real estate webmasters) host who does deliver an outstanding product to be sure.
CIndy Jones
February 6, 2012 at 9:48 am
Erica-Congratulations. There is no doubt in my mind that you made the right choice and will a success as an independent broker. I haven't looked back since going out on my own and with all of the tools available it's an easy decision to make. Though the franchises may spend big dollars on national advertising in the end the bottom line is how we treat our clients and present ourselves professionally that makes all the difference in a successful transaction.
CreaRealty
November 13, 2012 at 2:48 pm
Great post and thanks for sharing. I myself recently became a Broker and am at a crossroad. My questions to you is how are you going about the E&O Insurance / Risk Management cost? Do you see a difference in price? Thank you
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Kim Davis
October 19, 2015 at 10:45 pm
I recently obtained my broker’s license and my current broker has asked if I’d like to take over one of the offices. It is a small privately owned brokerage firm. Being that the firm is small, there is no office space, no sophisticated software, etc. I will be basically building it from the ground up. Can anyone suggest would an appropriate fee schedule would be to the owner for something like this? Any suggestions would be greatly appreciated.
Lani Rosales
November 12, 2015 at 10:42 am
Kim, I spoke with the author of this editorial, and she said that it’s a very personal decision with too many variables unknown to reply. Perhaps consider chatting with some peers in your market for an answer? Sorry we weren’t more help!
Philip
July 17, 2016 at 7:06 pm
I enjoyed the article, and seriously thinking about opening my own independent brokerage in New York. For me, the large franchise Brokerages tend to be often corrupt when it comes to sharing any strong leads with their agents. They usually make one or two Superstars, while everyone else scrambles for crumbs. That negative experience that so many real estate agents experience in their first year, is the reason for them leaving the business in its entirety. The experience that I have had with small independent Brokers has been totally Positive, Forthright, and Honest. A total Win-Win for everyone involved. The Brokers I have dealt with from independent real estate offices, have all tended to be very secure with themselves, and absent of the ego problem. I for one, am in the Independent Brokerage camp all the way.