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Life’s a beach

businessman on beach imageSelling up seems to be all the rage. It’s been a tough few years and maybe now’s the time that, you’d like to sit on a beach, travel the world or just, for once, hibernate.

There are options. Belvoir’s head office – and many of its franchisees – have been buying up rival letting agencies and franchise chains in recent months. So if you’re thinking about selling your business, should you be talking to them too?

Belvoir – a snapshot

The company is 20 years old this month and currently includes 210 branches including its first franchisee, who is still going strong. Its network is made up of some 165 franchisee branches plus 45 that the company recently acquired directly when it bought two rival franchise agency chains. These were two East Midlands-based companies; 30 branch Newton Fallowell and 15 branch Goodchilds.

We make some acquisitions but increasingly our franchisees are buying rivals. One recently bought a business in Edinburgh with a £1m turnover. Dorian Gonsalves, Belvoir

Dorian Gonsalves imageBut looking ahead, Belvoir says most of the company’s expansion will come from existing franchisees buying up rival letting agent businesses, often with the financial support of Belvoir’s head office. Belvoir has ambitions to have a branch in “every town and city in the UK,” says Dorian Gonzales. So, Countrywide, watch out.

How do you help franchisees acquire rival businesses?
“Since we floated in 2012 we have access to equity funds which have enabled us – so far – to loan £5million to franchisees who’ve wanted to buy rival companies. But these funds are usually only 20-30 per cent of the cash required to acquire a competitor. The remaining will need to be sourced from a bank or other lender or from their own private funds.”

Over the last three months we’ve had more agents approaching us about acquisition than we had in the previous year, so it seems there are a lot of opportunities. We also have an internal acquisition team that helps our franchisees to craft the deal.

Given your recent acquisitions, is it your main office or franchisees that will lead the growth curve?
“We are wholeheartedly a franchise model – although we have a handful of corporate offices our plan is not to grow our corporate office network. We believe in franchising; it’s worked extremely well for us and our franchisees over the years and by incentivising and assisting franchisees to grow their businesses in all of these local areas we feel we’re putting them at the heart of business. But we’re seeing more and more franchisees to expand through buying a rival, more so than those starting ‘from cold’.”

What sort of agent and chains are you and your franchisees seeking to buy – is it based on geography, turnover, book, profile, market-share or business ambition?
Belvoir exterior image“Our acquisitions come into two shapes – one is an acquisition made by us. We tend to be creative and opportunistic so if we see a good business to buy and we feel it’s a good fit we’ll certainly consider any size of lettings agency or chain. The second type of acquisition, our main type, is when a franchisee buys an existing business usually with turnover of up to £1.5 million.

Belvoir agency interior“For example, a franchisee completed an acquisition in Edinburgh during November of a business with a turnover in excess of over a £1 million. So franchisees, with our help, will usually consider any solid performing business, preferably as a bolt-on to their existing one. “And all of our franchisees are profitable, except for recent startups, which means we have a strong list of buyers looking to buy an existing franchise.”

So what happens to your business if you sell it a franchisee?
“An existing franchisee will buy your business and usually then amalgamate the two if they’re operating in the same town, for example. On the other hand we have a number of franchisees operating multi office networks so they would might buying an independent agent in a neighbouring town or city with a view to later re-branding it.”

So do you consider sales only businesses?
“Because we’re not wholly reliant on property sales it puts us in quite a strong position because we can gradually build sales into our business over the next two years, which is the plan. In one office in the south, property sales already represent a third of his income. And that’s just 12 months after the launch of our ‘sales drive’. But of the 61 who are offering sales, only 40 are actively doing it at the moment out of 160 franchisees so it’s early days. So we’re about a quarter of the way through the franchisee network.”

But why are you integrating sales into your business when everyone else is getting into lettings?
“The first reason is that although we’re a 95 per cent lettings business and manage over 35,000 properties, the lifecycle of a landlord means that more and more of them are asking us to sell their properties when they want to dispose of them. Also, we’ve found that the more ‘for sale’ boards we put up for landlords, the more enquiries we get from non-landlord vendors.”

What’s the end game for Belvoir – to become a franchise network rival to companies like Hamptons or Savills?
“We don’t see ourselves as companies like those because we put our franchisees at the heart of the business and don’t want to become ‘corporate.’ But saying that it’s likely that in the future, because of our expansion in to property sales and some other areas, we will have departments for new homes sales and, land and developments and the emerging private rental sector. But I think to be a Hamptons or Savills is a little too ambitious for us, to be honest!”

How do you or your franchisees find businesses to buy – do you have a separate ‘new biz’ team doing the research, or do they tend to approach you?
“Over the last three months we’ve had more agents approaching us about acquisition than we had in the previous year so it seems like there are a lot of opportunities out there. We have an internal acquisition team and they source businesses that franchisees could acquire and help craft the deal. We have a separate compliance team who we send in to perform due diligence.”

What happens if you’re a Belvoir franchisee reading this and you want to sell up?
Rick Flay image“A franchisee can sell out at any time but as the franchisor we approve the buyer. In most cases our franchisees join with a view to building an asset and then exiting after 10-15 years. One example is Rick Flay, who set up Belvoir Sheffield in 2006. He holds the record for the highest turnover in a month (July 2014) which was £100,000. He invested £250,000 in the business at start-up but recently sold the business for £1m.”

I set up Belvoir Sheffield in 2006, investing £250,000 in the business at start-up, but I recently sold the business for £1m. Rick Flay, Former Franchisee

How much latitude do franchisees have – are they free to operate as they like as long as they stick to brand guidelines ?
Like many franchise models we have a framework but we like to recruit franchisees with an entrepreneurial flair. So franchisees are free to design their own pricing structure because lettings in my opinion consists of lots of micro markets across the UK and they need to respond accordingly. So franchisees have a lot of latitude to be creative, to work on local promotions and marketing, charity work and community events within their towns and cities.

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