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Leaving a real estate franchise to become an independent broker

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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.

Erica Ramus is the Broker/Owner of Ramus Realty Group in Pottsville, PA. She also teaches real estate licensing courses at Penn State Schuylkill and is extremely active in her community, especially the Rotary Club of Pottsville and the Schuylkill Chamber of Commerce. Her background is writing, marketing and publishing, and she is the founder of Schuylkill Living Magazine, the area's regional publication. She lives near Pottsville with her husband and two teenage sons, and an occasional exchange student passing thru who needs a place to stay.

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16 Comments

16 Comments

  1. 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.

  2. 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

  3. 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!

  4. 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!

  5. 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.

  6. 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.

  7. 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

  8. Pingback: how to become an architect | Info Menarik

  9. 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!

  10. 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.

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Opinion Editorials

Uber CEO regrets saying that murder is part of business

(EDITORIAL) Uber CEO calls murder a mistake. Should society support a business that seems to think death is just part of the cost of doing business?

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Uber Pickup

On February 21, 2016, I woke up early to notifications about a shooting in Kalamazoo, Michigan. An Uber driver shot multiple individuals. Although I live in Oklahoma, the Facebook algorithms correctly deduced that this incident would be of interest to me. I have family and friends in Michigan, some in the Battle Creek area, just miles east of Kalamazoo. Later that morning, I learned that one of my friends had been killed in the incident.

Uber was criticized for the incident. Lawmakers across the country called for tougher background checks on Uber drivers. It was a PR nightmare for the company. Ultimately, it was the driver who was charged. Earlier this year, the driver pled guilty to all counts against him and was sentenced to life in prison. Uber continued operating, although then-Governor Rick Snyder did sign legislation that increased regulations for the ride-sharing industry.

I say this out of disclosure. This Uber tragedy affected me in a way that may cloud my opinion. I believe that Uber should be regulated more than it is. But recent events have made me question why society supports Uber and what I believe is a toxic culture.

How does Uber keep managing their corporate profile?

Uber seems to weather their PR crises fairly well. They’ve been criticized for inadequate background checks. Sexual harassment allegations at corporate headquarters shook up the management team. Uber has suffered data breaches. In 2018, the organization settled with the FTC for $148 million. Still, the company enjoys a market share of transportation services.

In 2018, Dara Khosrowshahi, former CEO of Expedia took over at Uber as its new CEO, replacing the CEO and founder Travis Kalanick. It was reported that Kalanick “led the company astray” from its moral center. Khosrowshahi said at the time, “In the end, the CEO of the company has to take responsibility.”

Just days ago, during an interview, Khosrowshahi said that “the assassination of journalist Jamal Khashoggi was a ‘mistake.’” It was a political murder. Khosrowshahi compared the assassination to a self-driving accident with an Uber vehicle that killed a pedestrian. It didn’t take long for Khosrowshahi to issue a retraction, saying that he “said something in the moment (he doesn’t) believe.”

Is Uber’s culture toxic?

Khosrowshahi says that his comment shouldn’t mark him as a person. He thinks that what he said was a “learning moment.” When a CEO misspeaks in an interview that isn’t just local, but international, maybe we should pay attention. According to him, murder isn’t a big deal. I wonder if he would say that if it was his father who died, or his friend who was killed by a driver.

When my friend died in the Kalamazoo shooting, I had to seriously think about how I viewed Uber. My friend wasn’t even using Uber at the time. She was getting into her own car at a local restaurant with some friends of hers. I recognize that Uber wasn’t responsible for the driver going on a shooting spree, but I have to wonder if it was Uber’s culture that led to a lack of response at the time.

Uber’s new CEO seems removed from how its services affect individuals and communities as its previous CEO did. When a company thinks that murder is a “mistake,” maybe it’s time to rethink about supporting a service that doesn’t seem to think about people, its employees, its drivers and its riders.

It may be more convenient than a cab, but it’s time to look at Uber’s real impact on society. I hear Uber saying that innocent deaths are just the cost of business. Is that the basis for a billion-dollar corporation?

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Opinion Editorials

Funny females are less likely to be promoted

(CAREER) Science says that the funnier a female, the less likely she is to be promoted. Uhh…

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funny females promoted less often

Faceless keyboard warriors around the world have been — incorrectly — lamenting that women just aren’t funny for years now (remember the “Ghostbusters” remake backlash?).The good news is they are obviously wrong. The bad news? When women dare to reveal their comedic side in the workplace they are often perceived as “disruptive” while men are rewarded.

That’s right. Women not only have to worry about being constantly interrupted, receiving raises less frequently than men despite asking for them equally as often, and still making nearly $10,000 less than men each year, but now they have to worry about being too funny at the office.

A recent University of Arizona study asked more than 300 people to read the fictional resume of a clothing store manager with the gender-neutral name “Sam” and watch a video presentation featuring Sam. The videos came in four versions: a serious male speaker, a humorous male speaker, a serious female speaker and a humorous female speaker.

According to the researchers, “humorous males are ascribed higher status compared with nonhumorous males, while humorous females are ascribed lower status compared with nonhumorous females.” Translation: Male workers earn respect for being funny while their funny female coworkers are often seen in a more negative light.

There are, of course, several reasons this could be the case. The researchers behind this particular study pointed to the stereotype that women are more dedicated to their families than their work, and being perceived as humorous could convey the sense they don’t take their work as seriously as men.

Psychiatrist Prudy Gourguechon offered another take, putting the blame directly on Sam the clothing store manager, calling out their seemingly narcissistic behavior and how society’s tolerance for such behavior is “distinctly gender-based.” She says these biases go back to the social programming of our childhoods and the roles mothers and fathers tend to play in our upbringing.

So what are women supposed to do with this information?

Gourgechon’s status quo advice includes telling women to not stop being funny, but “to be aware of the the feelings and subjectivities of the people around you.” While recommending an empathetic stance isn’t necessarily bad advice, it still puts the onus on women to change their behavior, worry about what everyone else thinks and attempt to please everyone around them.

We already know that professional women can have an extremely hard time remaining true to themselves in the workplace — especially women in the tech industry — and authenticity is often a privilege saved for those who conform to the accepted culture. We obviously still have a long way to go before women stop being “punished” for being funny at work, but things seem to be progressing, however slowly.

Former First Lady Michelle Obama shared her thoughts last year on the improvements that have been made and the changes that still need to happen, including encouraging men to step up and do their part. In the wake of the #metoo movement, CNBC recommended five things men can do to support women at work. There are amazing women in STEM positions around the world we can all admire and shine a spotlight on.

All of these steps — both big and small — will continue to chip away at the gender inequality that permeates today’s workplaces. And perhaps one day in the near future, female clothing store manager Sam will be allowed to be just as funny as male clothing store manager Sam.

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Opinion Editorials

To the unsung entrepreneurial heroes – we believe in you

(EDITORIAL) To the unseen entrepreneur we see you and we know that you work your tails off to do good things in your community even if it never means going IPO.

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I recently frequented one of my favorite new restaurants to find it permanently closed after less than a year. This locally sourced brunch place had pinpointed all of the farms that supplied their food on a map of California that hung like gallery art in the center of their restaurant.

They made sandwiches at their shop with donated food for the homeless and wrote inspirational notes to tuck inside their brown bag lunches. Their food was not only nutritious but delicious, and they seemed to always have patrons when we went, not too many that there was a line out the door, but enough that they always seemed busy.

I wish that we had spent more time there, more money, told more of our friends or left glowing yelp reviews, but we are only two people, two people who took a delicious restaurant for granted because we thought how could this fail?

I’m sure that’s what the owners believed too when they started out.

They probably thought they’d make great food that people want to eat in a location newly dubbed Silicon Beach – amid shiny live/work complexes, surrounded by startups and young people.

They ventured that they could morally source nutritious food, give back to the community, and be excellent.

Part of me imagines that they did so well as a restaurant that they shut their doors just to expand, or open in a better location, or take a much needed break. But they probably failed, like so many businesses do, and I want to take a moment to say thanks.

Not just to the restaurant that served the best breakfast tater tots that I have ever had the pleasure of eating, but to every entrepreneur who embarks on a journey that tries to make the world better.

I’m not just talking about the tech entrepreneurs, though we need you too.

I’m mostly talking about the unseen baker that wakes up at 3am every morning just to bring a handful of baked goods to their city. Or about the small store owner that stocks chotchkies and cookbooks and beautiful things all of which I wish I could buy. I’m talking about the start up plumber who shows up to your house on a Sunday afternoon and fixes your toilet because you’re at your wits end.

You are the unsung entrepreneurs, the heroes that we hurriedly thank on our way out the door.

You are the folks who had a dream and risked everything to bring us delicious food, adorable chotchkies, and functional plumbing.

A mentor of mine once told me that to be successful you must jump in the water, swim as fast as you can, and slowly increase the speed.

To those of you out there swimming as fast as you can – we’re behind you, and we appreciate you.

This is your headline, one you don’t often get — keep doing what you’re doing, we believe in you, and your hard work does not go unnoticed.

And if you decide after everything you’ve been through that it’s time to hang a permanently closed sign on your front door, there are people out there, lots of them maybe, who will mourn the loss of your mini quiches, your adorable iPhone cases, or even the best breakfast tater tots in the world.

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