To Franchise or Not to Franchise? That Is the Question

When you decide to open a real estate brokerage, you can take one of two paths: either go indie and open your own unaffiliated brand; or leverage an established, national franchisor brand. Both options present their own set of challenges and benefits. As of late, there has been much chatter in the industry about the long-term success of many franchise brands, with the evolution of new, well-funded brokerage models popping up. Let’s discuss the pros and cons of each option.

Brand Recognition
Going out on a limb and starting an independent brokerage can provide the opportunity for autonomy and flexibility. As an independent broker, there are a lot of positives—it’s your name, it’s everything you’ve created and you’re not tied to a long-term contract. You have complete control over the branding, marketing assets and promotional style, which some prefer—but unless you’re a marketing guru or have someone in your back pocket who is, this could be intimidating and pretty costly.

Creating a brand from scratch means developing a name, look and feel of the company, collateral, a website and everything else that represents your presence in the industry. It takes time for people to learn about who you are and what you do. While you are in control of your own brand, maintaining a strong marketing program can be a substantial financial undertaking compared to what you’d pay at a franchise like HomeSmart, where all marketing programs are at no additional cost to brokers or their agents.

For many real estate professionals, what makes an established franchise brand so appealing is that it is easily recognizable. Agents trust the brokers they align with, so it’s important for brokers to think about branding and how they can provide a solid branding experience for agents and consumers alike.

Adaptability
However, even brokers and agents who operate under a franchise face challenges. As the industry shifts, it’s crucial that an established franchisor is able to adapt with the trends of the time and keep up with the consumers’ (agents’ and clients’) needs. Many of the longest-standing brands in the country are evolving more today than ever before, and this evolution is necessary to stay relevant and provide the on-demand experience brokers and agents need so they can, in turn, meet rapidly changing consumer expectations.

As an independent, you may be able to move fast because you’re operating as a standalone entity—but, with the support of an open-minded and creative franchisor, you’ll have a wider net and resources to help you foreshadow industry and market trends and adapt efficiently and to scale.

Leaning on a franchisor for guidance and support doesn’t have to mean brokers and agents lose individuality, though. More agents today are wanting to brand their own name, so as an independent broker, why focus on building your company’s brand by scratch, when agents are more concerned with their own name? Franchisors are realizing this, and modern models like HomeSmart International are now allowing the individual to identify themselves, while still branding in accordance with their brokerage’s standards.

Value Through Systems and Technology
Any broker, whether a franchise owner or independent, is going to have overhead—fixed costs of rent, employee salaries, branding, marketing, transaction management software and other technology systems. Ask yourself what it’s going to cost you. The differentiation is either:

Starting an agency where you have to purchase absolutely every tool and system you and your agents will need to be successful
Joining a franchisor that offers you the tools and technology you need to run your business and has already figured out the recipe for success

When you buy a franchise like HomeSmart, you’re not only getting the name that’s identifiable to agents and consumers, but also a proven business system and an end-to-end integrated technology set. You won’t pay incremental technology costs, negotiate with vendors or overload your P&L with obscure staff positions,either.

Who Do You Want To Be?
Next, ask yourself who you want to be—a small, medium or large broker? Look around. Big guys in the real estate space are gobbling up small and medium brokerages who are struggling because they can’t afford all the technology and systems they need.

If you look at the top 10 companies in the RISMedia Power Broker Report, most of them are franchises and they’re all well-known brands. So as you think about independent versus franchise, look at your MLS marketplace and see who has the top marketshare. Are the top five franchises or non-franchises?

You also need to understand your business plan and what you’re trying to accomplish. This is key when deciding whether you want to talk to a traditional brokerage or a transaction-based brokerage like HomeSmart.

At the end of the day, the one thing everyone can agree on is that the success of any brokerage depends on its leadership and culture.

Bryan Brooks is the senior vice president of Franchise Sales for HomeSmart International, responsible for spearheading the company’s domestic and international franchise growth initiatives including mergers, acquisitions, roll-ins and conversion opportunities. For more information about HomeSmart International franchising opportunities, please visit HomeSmart.com/Franchising.