In Europe franchising is on the rise. Already in Germany, there are already around 1000 different franchise systems, and the trend is growing. In the US, franchise systems account for more than 30 percent of total retail sales. Also in the real estate market there are in well-known franchise systems. However, the concept is by no means as prevalent as in the US, where it is much more widespread.
The concept of franchising provides that a franchisor provides a franchisee with the use of a particular business system for consideration. In general, the transfer of knowledge, as well as the use of a trade mark, belongs to it. The franchisee works legally independently, but pays, for example, for the use of the distribution system, company logo and office equipment fees. In the real estate market, the franchisor usually assigns a franchisee a regional area and supports it – also through training and mentoring. Contracts such as reporting, accounting, non-competition, marketing concepts, control rights, term of contract and termination are regulated. Franchising has the right to system-compliant behavior of the contractual partners. This is intended to ensure a uniform appearance on the market.
The advantages for a franchisee in the real estate market lie not only with the usually available area protection in the financial area. It profits through the mostly existing office communities, for example in marketing activities, in the procurement of office supplies or in bookkeeping. With a well-known brand in the back, the chances are rising that banks will positively assess the entrepreneurial risk and the creditworthiness of the franchisee. He works according to a proven and continuously optimized business concept with tried and tested workflows. If the system or the name of the franchisee is known and established, this can speed up the entry of the franchisee into the market.
Even those with limited know-how have good chances to become a real estate broker in a franchise system as permanent further training and training are part of the concept. This is of course benefited by trained real estate buyers. Another advantage is that the franchisee can take advantage of the company’s overall power. In addition, a regular check is carried out by the franchisor, which should uncover or prevent in advance the knowledge deficiencies, misconduct or other grievances. The franchisor, on the other hand, enjoys the advantage of being able to push his concept with a relatively low financial outlay. He also benefits from the collected knowledge of his franchisees, which he can pass on to them in a bundled way. This promotes rapid company growth and, in the best case, an advantage over the competition.
Is the franchising concept the best solution for real estate brokers – a real win-win situation?
First of all, the broker as a franchisee has virtually no influence on the business planning of the franchisee. Although it is self-sufficient, it has much less entrepreneurial freedom than a free real estate broker. This is not only a risk of conflicts of interest. Costs can be reduced, for example through the sharing of an office, software solutions and real estate portals, but the license fees and fees for an initial equipment etc. must not be ignored.
However, some franchisers charge about 30 percent of their sales as franchise fees. Fixed monthly payments may then be more sensible than a revenue share, which increases with increasing revenues accordingly. On the other hand, a monthly fixed fee can initially be a very heavy burden.
The licensing fee at Engel & Völkers, for example, amounts to 12.5% of the net turnover for a contractual term of 10 years. Added to this is a one-off license fee of 42,500 euros, as well as other costs. For the store business. Training in real estate or experience as a broker is not required.
Unfortunately, there are also black sheep in franchising. If, for example, the initially promised support from the office management is not provided, especially career changers are quickly lost. Monthly fixed costs and resulting licensing or seminar fees can quickly become a boomerang for inexperienced brokers. Especially in the first months the income of a franchisee can turn out to be very small or even slip into the loss zone. And, last but not least, your own image can be adversely affected by unfavorable, unprofessional actions by the franchisor or office partners.
In the end, the job of the real estate agent is to buy and sell real estate and ranch land – whether as franchisees or self-government. There is simply no guarantee of success. Anyone who wants to be successful in the market should bring or acquire know-how, legal, commercial and enforcement. And of course he must not forget the most important part, the commission itself. The broker has to convince his clients, because the name or logo of a franchisee is crucial for the fewest real estate owners. As a rule, there are no sales orders from the franchisor, which must be acquired by the franchisee himself.
Another interesting question is whether franchising for real estate brokers has the classical advantages of franchising. The real advantages are that customers, for example, get the same products and services from McDonalds or Burger King worldwide. Can franchising for real estate brokers do this? Each property is finally different.
Nevertheless, in Germany, real estate worth billions a year changes their owners. In the economic upswing as well as in the short term, real estate is always being sold or inherited. However, few sellers have the opportunity to implement the time or the expertise to make this project private. Here, professional real estate brokers are in demand.