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Do agent franchises work?

Following on from last month’s look at property franchises, Lawrence Higgins turns the spotlight onto agent franchisees.

Property Drum
Starting any new business is always daunting, fraught with difficulty, but the issues may be reduced if you buy into an established franchise. The main benefit that reduces your chance of failure is that you are buying a concept that has already been proved successful. Statistics can prove all sorts of things, but many diffrent studies estimate agent franchises have about the same chance of surviving (75 per cent) the first year as an independent startup has of going under.

This is often because you are not going it alone; there is help running the business and hand holding if required. Many of the buying decisions, from stationery to IT systems, have been trialled and undertaken for you and training is available to make sure everybody knows what they are doing. A franchisee may have access to marketing campaigns and material that an independent startup can only dream of and, of course, there is the established brand recognition.

But for every swing there is a roundabout. Buying an agent franchise may not truly fulfil your lifetime dream of running your own outfit – it is not your name above the shop – you have to do it their way – and their way may be extremely specific. Costs are an issue with any start up, but with a franchise, after your initial fee you will usually be liable for royalties, a percentage of turnover/profit and other relevant extra fees. And you have some tough decisions; not just deciding which type of franchise is suitable for you but whether the parent company is up to scratch and if they truly care about your progress once you have handed over the initial fee.

The property industry offers a number of choices – here are the experiences of three who decided that an agent franchise was right for them.

HUNTERS

Caroline Murgatroyd opened Hunters, Tring, Buckinghamshire, in November 2011.

franchisingInitially Caroline opened under the Hunters ‘Personal Agent’ franchise banner, before locating suitable premises and launching her branch in the summer of 2012.

What brought you here? I had worked in several estate agencies in north and central London as well as buying, developing and selling residential properties in the north London area. With previous experience in the fashion and advertising industry, I felt that I also had enough experience and confidence in sales and marketing to run a successful estate agency branch. Having spent 10 years living around Tring, I had developed real knowledge of the area so had a good foundation for setting up a new Hunters branch.

Why a franchise? The Hunters Personal Agent franchise model allows experienced and entrepreneurial agents to run their own ‘remote’ business – without a branch – with low overheads and more time to be out selling and letting properties. Working in close association with nearby Hunters branches, Personal Agents work in their own neighbourhood using their expert local knowledge and contacts and have a very proactive approach in promoting the Hunters name to drive valuations and instructions.

Costs and profits. The Hunters Personal Agent Franchisee model carries a cost of £2,995 plus VAT with the franchisee retaining 75 per cent of their income. The Hunters Branch Franchisee arrangements have a cost of £15,000 plus VAT with the franchisee retaining 90 per cent of their income.

I negotiated a good deal on my rented premises which carry running costs of around£2,000 per month, plus staffing costs and additional marketing. At the moment I am the Branch Manager and I am assisted by a negotiator and a mortgage advisor in branch.

The branch is already breaking even and should hit profitability by the end of 2013.

Where does the branch sit within the local market? One of the key reasons I chose Hunters was the fact that the brand covers the entire market place – bottom, middle and top.

What support is given by the franchisor and what is most useful? Hunters offer lots of valuable support with award winning training courses and informative quarterly conferences for all agents. The Franchise Sales Director makes routine visits to offer advice and support on operational and marketing strategies. All franchisees benefit from the in-house Marketing & PR team. Hunters has also just launched a national advertising campaign that profiles the brand and its partners across major newspapers throughout the year. The network of branches is also well co-ordinated for internal referrals and the in-house sales team, The Biz, works to support branches to bring in leads and valuations that would otherwise be missed opportunities. They also offer a fantastic call overflow service so that no calls are ever missed.

How do you plan to develop your business? I intend to move the business forward over the next 18 months to improve market share within the area. I have already identified three other locations that I wish to expend into over the next five years.

What makes you stand out from your competitors? We offer a complete range of services from initially dressing the house for sale, to the final bespoke interior design services when the chain has completed. As a brand, Hunters the Estate Agent offers several key benefits including independently owned branches (customers are dealing directly with business owners) fully trained staff and a significant level of customer satisfaction.

What is your branch motto? “Taking the stress out of selling your house”.

WINKWORTH

Christopher Baker, 30, opened Winkworth, Exeter in May 2009.

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What brought to you here? I left school at 16 and undertook a training contract with a firm of Chartered Accountants. After five years I realised that I was doing a job based on its reputation rather than doing  something I actually enjoyed. My estate agency career started in the Countrywide Group and whilst people have differing views on the corporate approach, it is definitely a good place to start a career in this business. Over time I progressed through the ranks to the position of a Branch Manager.

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I believe it is the customer service that they receive that sets us apart.” Christopher Baker Winkworth, Exeter

Why a franchise? Having become frustrated at the limitations of being a manager within the corporate world, I knew I was going to strike out on my own. I took a lot of time to consider the best approach forward, I liked the idea of being an independent agent, able to do what I wanted but I also knew that very few independent agents actually become market leaders. The Winkworth franchise model allowed me to act as an independent within my local marketplace, under a corporate banner – the best of both worlds.

In 2009 I believed the market wasn’t going to get any worse and the recovery would take time giving me a good run at being on an even footing to the more established agents.

Costs and profits. The suggested start-up capital was around £100,000. It would have been possible to keep within that level however we decided to increase this, which we believed would repay us in the medium term. I opened with just one other member of staff.

At its highest, our running costs passed £24,000 a month; however we were given some sage advice by a well-known estate agent and since this have reduced our running costs to below £20,000 a month.

We broke even at the end of our first full year of business and are trading in profit.

Where does your branch sit within the local market? We are in between the high street agents and below the country house agents. That said we operate in both of those markets as well. This has helped us over the last four years as we have seen both of these markets do well and stagnate at different times.

What support is given by the franchisor and what is most useful? I had the wrong mindset initially as I calculated everything on what I got from the franchisor. Since the relationship developed and I started to realise that I wouldn’t be in the position I am today without the brand, things have blossomed.

The Winkworth franchise team is always at the end of the phone to help. We get fantastic press releases in the national newspapers, the bespoke marketing material that is produced and the general business support and help is terrific. I consider the franchisor and other franchisees as part of a big family.

How do you plan to develop your business? In 2012 our business was 60 per cent up on 2011, something that I question whether an independent agent could compete with. I would like to see the lettings business develop further in 2013 and would like to develop this through acquisition.

What makes you stand out from your competitors? The general perception of estate agents is that we are all the same: I believe it is the customer service that they receive when they call or walk in that sets us apart.

What is your branch motto? “Better every day.”

WHITEGATES

Shoaeb Vali opened the Manchester Chorlton branch of Whitegates (part of Xperience) in October 2012.

franchisingWhat brought you here? I had spent eight years in banking/mortgages and another eight years running a Post Office. I sold this as I needed a challenge and I started a courier logistics business “Orbital Express Ltd” from scratch which is now run at arm’s length.

Why a franchise? I originally looked at opening as an independent but then realised the entry to the market place would be pretty difficult. As I had previous experience with the Post Office on a franchise basis I thought it would be a good option. I decided on Manchester as I wanted an area with a large conurbation within easy travelling distance from Dewsbury, where I live.franchising

Costs and profits. Running costs vary according to the size and location of your staff is currently around £4,000 per month.

Where does the branch sit within the local market? Whitegates has a strong brand which positions us around the middle to top of our target market.

What support is given by the franchisor and what is most useful? There are frequent training sessions available with new marketing ideas coming through. We benefit from corporate deals with other companies such as Rightmove and we utilise Whitegates’ marketing to its full potential – especially Whitegates TV.

How do you plan to develop your business? We go the extra mile, effectively providing a concierge service. This relieves the stress from the buyers and the sellers which in turn provides hassle free moving experience.

What makes you stand out from your competitors? Our USPs are Whitegates TV, the brand and Concierge type service to provide the highest customer satisfaction. And our iPad presentations!

What is your branch motto? It’s all about Service, Service, Service – you will tell your family and friends how great it was.

March 6, 2013

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