How to Launch a Real Estate Franchise
NEW YORK ( MainStreet) While RE/MAX was named one of 2014's fastest-growing franchises by Entrepreneur Magazine , Dan Duffy contends that operating a real estate franchise has its challenges. "For entrepreneurs looking for a new venture, buying into a franchise is an attractive concept, but even with the backing of a successful franchise, the success of an individual store or office is not guaranteed," said Duffy, CEO of the United Real Estate franchise.
RE/MAX ranked 16th overall among the Fastest-Growing Franchise Rankings by selling 166 new real estate franchises in the U.S. during the first three-quarters of 2013.
"Our franchisees know that RE/MAX represents opportunity, the freedom to run their business their way with the support and strength of a leading global brand," said Margaret Kelly, CEO of RE/MAX.
However, profiting from a real estate franchise, just like any franchise company, requires an incredible amount of work.
"Even if your investment is modest, you must be prepared to roll up your sleeves and be engaged with the entire business," said Duffy, whose real estate franchise in Kansas City, Missouri has grown to 12 territories nationwide in nine months. "Immerse yourself in the day-to-day execution early on so that you better understand what will be expected of you long term."
Realtors looking to own a real estate franchise can expect to pay $12,500 to $100,000 in initial fees for a single office territory while ongoing fees are generally in the form of royalties and national marketing fees of 6% to 10% of commissions earned. There may also be other affiliation, technology or desk fees.
"More popular franchises are not easier or more difficult to operate," Duffy told MainStreet. "Attributes to examine when considering one real estate franchise over another is cultural fit, value exchange and whether it is a mutually profitable partnership."
United Real Estate promises a 30% to 60% increase in income for its franchise agents by charging a low monthly affiliation fee and a flat per transaction fee that is absorbed by the buyer or seller in a transaction.
"What we offer for free is technology support that includes the office web site, search engine optimization, search engine marketing, agent web sites, telephone support, access to private intranet and marketing templates as well as automated marketing software," Duffy claims. "Most other real estate franchises either do not offer these services or charge an additional fee for these services."
Among the mistakes entrepreneurs make with their recently acquired real estate franchises is failing to market their services and hiring incompetent managers.
"Most new franchise systems struggle to build the resources to support a franchise network," said Duffy. "It is expensive and takes time to build the right team of experienced professionals in each role on the team."