Starting up your own business is challenging and risky – and never more so than in these economic times. The property industry has certainly taken a hit, with transactions still well down from the heyday of the mid- 2000s, so agents have to work harder and smarter for the business that’s out there. While some agents, that simply rode the wave of the buoyant market in the 15 years to 2008, have gone out of business, franchised agencies have, in general, not only remained profitable, but have continued to experience good growth during the recession.
Sarah Walker, at Designs on Property, has been working with franchise businesses and says that “within the huge and varied franchise spectrum property is performing very well, a recent NatWest/British Franchise Association (BFA) survey showed growth in lettings franchises as several times that of the total national franchise growth figure.
“Franchising in property has been around since 1981, when Winkworth was the first estate agency to franchise, but it was in the mid-90s that it really started to grow as a business option within the sector. Now there are more than 20 estate and letting agency franchises, 12 of which have some level of membership with the BFA, demonstrating both their professionalism and the viability of their business model.”
So, why choose a franchise? Property services remains the largest sector in franchising, and in that Nat West survey, it was found that over 90 per cent of franchisees are happy with their franchisor and that their business is profitable. And that’s a key reason to choose franchising, says Sarah – your increased chance of success. “Research by the franchise industry has shown that more than half of all new businesses fail within the first five years, compared with only around five per cent of franchises, and more than 90 per cent of franchises show a profit after two years. When they do fail, it’s usually down to the franchisees simply not being suited to working within the parameters imposed by the business model.
“With a franchise, you benefit from a tried and tested business formula, a name that’s trusted in the market and access to resources it would be either very hard for you to access working on your own. Most franchisors offer an established marketing department, bookkeeping and accounting advice or services, access to special group discounts on products and services and regular business reviews and consultancy. It’s still your own business, but you’re backed by a ‘parent’ company.”
And, of course, you have the benefit of a large pool of ‘colleagues’, which you don’t have when you start out on your own road and this, says Sarah, is invaluable, “Of almost equal value to having a franchisor behind you is being part of a network of franchisees, all of whom are in a similar position to you. Those who go into ‘whitecollar’ franchises have often come from a corporate background and many have held senior positions, so what you’re also buying into is a ‘mastermind’ group with a wide range of business expertise. Most franchisors organise regular conferences and workshops where you can discuss challenges and ideas and come up with the best solutions to move the business forward.”
And the downside? “Well, it depends on your view of what’s value for money, because you’ll have to pay a joining fee (generally between £10,000 and £20,000) and commit to a minimum five-year relationship with your franchisor, during which you have to pay them monthly ‘management service fees’ – usually a percentage of your turnover. So you need to decide whether the benefits of the franchise outweigh those costs.
“It’s not an ‘easy’ option and there’s no guarantee of success, but for those who are prepared to work hard, follow the proven systems and strategies of the franchisor and make the best use of the resources and support available, the chances of developing a strong and profitable business are very good indeed.”
To get the real facts and figures, PROPERTYdrum spoke to many of the UK’s leading property franchisors along with some similar business models which help individuals start a property business but are not ‘true’ franchises. Some are large and well established, others small, but growing in popularity. All are interesting!
Spokesperson: Roger Lake, Founder and Director
Facts & figures: Established five years, 30 franchised auction rooms and numerous Introducers/Joint Auctioneers. Six new auction rooms in past 12 months, in Coventry, Manchester, Bristol, Cardiff, West Hertfordshire & East Essex and Berkshire. Head office: Norwich, with four staff. All franchisees are existing operators in the property market, most are multibranch estate agents who have added Auctions as a valuable diversification. Others are existing auctioneers who have joined to take up the brand and capitalise on the network opportunity.
Fees: Joining Fee reflects the territory taken, typically between £6000 and £12000. The typical initial outlay before income is received from the first auction is less than £10,000.
Timescale: At least break-even in the first year and worthwhile profit from the second year.
Message: We have the answers and a ‘system’ that will make the business fly, however the business does need to have the right leader; ours is a people led industry which makes the choice of individual important and their training/support crucial. We provide guidance and always attend and help manage each first auction, thereafter we are available 24/7 with advice and assistance. We have a vested interest in each of our franchisees succeeding, and work hard to develop and enhance the brand’s customer service activities.
USP: We are the UK’s No.1 residential auctioneer with an excellent reputation and an impressive track record. We run successful traditional auctions that are fair to both the buyer and seller, run professionally with accessible Legal Packs, open house viewings hosted by auction experts, impressive catalogues and highly regarded auction events. We regularly sell to end-users and have added a Commercial Auctions capability to our operation. Estate Agents may also join our network as Joint Auctioneers under a commission split arrangement. We have over 100 agents working with us; no long term lock-in, no monthly charge and no set up cost – all they do or need to do is spot an auction opportunity, tells us about it, help with the viewings if they wish to and bank their share of the commission. Joint Auctioneers regularly earn in excess of £10,000 some over £15,000 in a year.
Last word: Auctions are the future and Auction House is the franchise leader in this sector. Multi-branch estate agents really should consider adding it to their range of services, and for single office operators our Joint Auctioneer ticks all of the boxes.
BALGORES PROPERTY GROUP
Spokesperson: Martin Gibbon, Director
Facts & figures: Established in Basildon, Essex in 2004, This is not a franchise, but a business partnership, where Balgores opens, brands and supports new agencies by means of a 50-50 partnership. Once the first office was established Balgores Hayes Ltd wasclaunched, in 2005, then Balgores Low Ltd and Balgores Lettings Ltd launched in 2007. Head Office is in Hornchurch, Essex. All franchisees are experienced estate/letting agents who have launched a “new start” business under the Balgores brand.
Fees: No franchise fees, each business is set up on a 50/50 partnership with each party contributing 50 per cent of the set up costs and running costs. With a £20m turnover, the Balgores Group secures very favourable overdraft rates with its bankers, to help new agencies. Average total set up costs, excluding salaries, approximately £150,000.
Timescale: It has taken six years for these offices to pay back their investment and make a profit, however, this has been during the recession, which has affected the speed of development.
Message: The cost to run the business is always far more than you expect, gaining instructions is incredibly difficult. Unless you have marketing that blows the competition away, you may as well forget it. This is very costly and the reason it has taken time to get into profit. However, the group is returning around 19 per cent profit margins, excellent in this climate.
USP: We have a very experienced Director in each branch, driving the business, available morning, noon and night by ‘phone and our marketing is superior to our competitors.
Last word: We go the extra mile, are always honest with our valuations, calculated with the extensive research that we do as a team, prior to visiting each property. We also visit our vendors every month in their home, for a marketing review, until the property is sold.
Spokesperson: Dorian Gonsalves, CEO
Facts & figures: Established 17 years, 148 franchised branches across the UK, seven new branches in the past 12 months. The only specialist lettings franchise on the AIM market of the London Stock Exchange.
Head Office: Grantham, Lincolnshire, with a staff of 27, including Directors. There are two corporate-owned offices. Network turnover for last financial year was £22,200,141.54, Network profit: circa 25 per cent. Belvoir Property Management UK Turnover was £3,350,536 with a profit of £1,459,179. 98 per cent of franchisees are completely new to the industry.
Fees: £22,500 plus VAT and working capital. The franchise license entitles the franchise owner to operate under the Belvoir name, with Belvoir’s branding. The fee includes an intensive three-week training course, personalised support from a business mentor, a legal helpline, national promotion and PR, a state of the art website with personalised pages, improved purchasing power and the ability to network with other franchise owners who would normally be competitors. Franchise fee is 12 per cent of monthly turnover, most franchise owners will require a total investment of £100,000 to £135,000.
Timescale: Some franchisees break even very quickly. Belvoir Telford broke even after five months, but a new franchise owner should aim to break even between months 12 and 18.
Message: It is very important for franchise owners to comply with the Belvoir franchise model, as it a tested and proven. The lettings market is buoyant but highly competitive and franchise owners need to differentiate themselves. They can do this by focusing on Belvoir’s core principles of professionalism, specialism in the rental sector and providing outstanding customer service.
By embracing the concept of franchising and being a proactive participant in the network, as well as taking full advantage of the outstanding support and training that is on offer from Central Office, Belvoir franchise owners have a high chance of succeeding when compared to independent traders.
USP: Brand Belvoir is extremely powerful and an independent survey of 1500 landlords revealed that the two main influencing actors in choosing a letting agent were customer service and trust. Belvoir is the only specialist lettings franchise on the High Street and because franchise owners don’t sell property or charge for providing specialist advice they can offer honest, unbiased advice and gain the trust of landlords. This is what differentiates Belvoir franchise owners from the competition.
Last word: The Belvoir business model, proven and tested, offers franchise owners the very best chance of success. Belvoir has, three times, been voted Best Lettings Franchise 2012. Belvoir is now the UK’s largest specialist lettings franchise and the only one listed on the AIM, which is allowing us to execute our exciting expansion programme. Belvoir is a shining example of an ethical, professional franchisor, offering a viable and profitable franchising opportunity.
FINE & COUNTRY
Spokesperson: Matthew Pryke, CEO
Facts & figures: This is not a franchise, but a licensing structure; whilst keen controls are placed on the use of the brand and its promotional and marketing tools, the day to day business operation is determined by the licensee. Licensees are subject to a licence agreement, code of conduct and brand guidelines which determine the use application and association of the Fine & Country brand. However there are no operations manuals or procedures to constrain the licensee.
Established in Bishops Stortford in 2001, Head Office is in Mayfair, London, 300 outlets worldwide, 201 in the UK. New in 2011 were Portugal, Spain, Cairo, Namibia, Nigeria, Bahamas, Mozambique, plus 10 in South Africa, 16 new in the UK, three closed. 12 more new UK offices expected to open in 2012.
Many franchisees are experienced estate agents who wish to move into the prestige property space. Others are new or recent entrants. Recently we have enquiries from people unconnected with the industry.
Currently no fee is charged to become a licensee. The licence fees, charged monthly, are valued individually based on the postcodes territories which form the licence. The fee is not tied to the turnover of the business as the business is firmly of the belief that we do not wish to penalise our licensee’s success. It includes: branding; marketing properties via fineandcountry.com; involvement and promotion of properties via Fine & Country’s national advertising in publications such as The Times and The Telegraph; editorial coverage via the Park Lane PR team; portal syndication, the Fine & Country hub for marketing materials, information and market intelligence; conferences, training,meetings; the IT and social media proposition and referral opportunities.
Fees: Licence fee can range from £1,000 per month up to £9,000, the average licence fee for a single licence territory is approximately £1,750 per month.
Timescales: The top end of the market is very lucrative if an office performs strongly however it’s not a market that can simply be “walked into”. We suggest that licensees look at the investment over a 3 year period. With break even likely between year 1 and 2 and profit between year 1 and 3. Most offices beat this target.
Message: Fine & Country is in an incredibly competitive market that requires agents to adopt an approach that is entirely different from the mid to lower part of the market. The key is making the licensee understand that the market is requires a different, more sophisticated and complete approach that utilises the many tools that are available to a Fine & Country licensee.
USPs: Targeted property promotion; Widespread editorial exposure and advertising; Creative, professional presentation; Park Lane Offices; award winning brand.
Last word: Not a franchise, but a licensing company. This provides the ‘best of both worlds’ as licensees use the Fine & Country brand without being restricted by Procedures.
MARTIN & CO
Spokesperson: Ian Wilson, Managing Director
Facts & figures: Established in 1986 with 187 branches (including three company offices) nationwide. 32 new franchised branches opened in the last 12 months. Head office in Bournemouth with 38 staff. Last financial year: £3.5m Turnover / £1.3m Profit.
It is not a pre-requisite, but Martin & Co. does attract ex estate agents buying into a lettings brand as well as agents that continue to trade in sales independently but select the Martin & Co brand for lettings. With the move into sales we have had existing franchise owners rebrand their sales businesses. Most are new to the industry, with backgrounds ranging from police officers, to tennis coaches and vicars.
Fees: Online agency: £16,500,Office: £18,500 to purchase with 9 per cent fee which provides: Business planning; training & development; marketing; IT; ongoing support. Average total set up cost: Online £30,000, Office: £80,000.
Timescales: Generally, for Online Agents 17-18 months break-even, for Offices it’s mid to end Year 2 break-even.
Message: Martin & Co is a multi award winning agent, and a brand leader. We manage the expectations of our franchisees in terms of how long it takes to establish the brand and reputation in the market place. The key message is, ‘Knowing your area of expertise inside out and delivering a professional, highly customer focused service is key to franchise success.’
USP: Multi award winning, proactive and innovative franchise who are professional letting and property management experts with a unique subscription model aimed at professional landlord investors that also gives sellers a choice in how they sell their property.
Last word: Over the past decade, the private rental market has grown by 7.5 per cent compound per annum. Martin & Co has grown by 20 per cent compound. We have outperformed a feared market.
Spokesperson: Toby Limbrick, Director
Facts & figures: Established three years ago, currently has 25 partner agents. Having successfully tested the approach, we are now in the process of launching a revised business model to make it even more attractive for agents to join the network and benefit from adding auctions to their services. Head Office: Watford with four people who co-ordinate the marketing and auction organisation etc.
Network Auctions is launching a revised business model to make it even more attractive for agents to add auctions to their services.’
Auctions have grown in popularity as a transparent method of sale but it is difficult and costly for an individual agent to run an auction. Network Auctions operates on a licence basis and provides the partner agent with access to national marketing, expertise, training, mentoring and support, and London and Glasgow auction rooms.
Network Auctions last two auctions have achieved 80 per cent and 78 per cent sales respectively.
Fees: £250 plus VAT joining fee which covers set up, branding, training, mentoring and support, access to the members section of the Network Auctions website, PR and marketing. The licence is for three years at £365 plus VAT per annum. The agent has the exclusive rights within their location. London auctions currently take place six times a year and there is marketing and PR support to help the partner generate lots.
USP: Partner agents secure lots to be sold at Network Auctions auctions. All auction costs are borne by Network Auctions and commission is split. Network Auctions and partner agents also secure lots in other partner agent territories with fee splits.
Message: Crucially, the partner agent retains their own branding, co-branded for auctions with Network Auctions, for example, Fudpuckett & Co becomes Fudpuckett & Co Network Auctions. This, combined with exclusivity in their branch location, is a key feature.
Network Auctions’ auctioneer, Guy Charrison is a well-known industry figure and is the current Chairman of NAVA.
Last word: The combination of local expertise and marketing combined with national expertise and exposure is a winning combination and the new licence arrangements mean that agents can extend their service offerings with a professional and highly visible auction offering without significant financial outlay.
Spokesperson: James Trimble
Facts & figures: 149 branches in all, 14 new franchised branches opened in last 12 months: Newbury (Conv), Bournemouth x3 (conv), Devizes (Cold Start), Harrow (Cold Start), Farnham (Conv), Petersfield (Conv), Chislehurst (franchisee’s 2nd office) Canterbury, Worcester Park and Cheam (conv), Grantham (Cold Start). Exchanged on latest office, 3 more nearly there. Around 95 per cent of franchisees are estate agents of various backgrounds and experience. The majority are looking to go further with the support of a larger brand. Country offices say that vendors are looking for the larger London brand names to sell their homes. By adding the local expert/independent agent to the larger London brand we bridge that gap. We do look at cold starts but finance is tighter, typically this has restricted the people we can progress with.
Fees: £14,000 franchise fee with an ongoing royalty of eight per cent. Other smaller fees may apply. Average total set up cost varies, typically for cold start offices, franchisee needs access to £100,000-£150,000.
Timescale: Branches are typically breaking even on a monthly basis after 6-8 months, depending on the area and the competition. By the middle of year two I would expect the business to have paid off the initial investment of setting up and be making a regular monthly profit.
Message: Be realistic and do your research. It is not easy and a name is not the only part. The town, the location, the shop, the investment and the brand will only work if the individual is right as well.
USP: A joined-up network. Our offices work together. A combined database for applicants and vendors along with regular sharing of valuations and instructions means that we can offer added value to those independent agencies that are on their own.
Winkworth is one of the few firms that deal with the larger family houses across the country with roots in prime central London. It means the brand can sit comfortably alongside, compete and beat those large brand names that everybody knows. The USP is that you are dealing with someone who can make a decision on a local level. Local director, local decisions, national brand.
Last word: We make regular approaches to independent firms where we think that together we may be able to take a step forward. We are not interested in failing firms but rather smart firms that together we can progress and make a dent in the local market place. Franchising isn’t for everyone and nor should it be, but for those who are looking for comprehensive support and a brand name as well as strength in numbers can and do benefit to the point that the uplift on conversion far outweighs the franchise fee… some as high as 156 per cent uplift.
Spokesperson: Andrew Bushell, Sales Director
Facts & figures: Established in 1992, celebrating 20th anniversary! 126 franchises. Group HQ is in York with 25 staff. Turnover for last financial year: in excess of £5.5m.
In the past 12 months, 87 franchises joined the network (fastest growing estate agency brand in the UK) including the acquisition of Bairstow Eves. Nine cold start franchises, of which 50 per cent had no agency experience.
Fees: Franchise fee £15,000 plus VAT, ongoing the franchisee retains 90 per cent of income – subject to a minimum fee of £400 sales and £200 lettings per month (not payable for first 3 months of trading)
Included in fees: Business planning, location mapping and forecasting, retail property search and design, launch, marketing support, design, training, Account Manager, internal communications (including web area, forum and conferences), start up stationery and boards, discounts – for example, property portals and ability to expand.
Existing business conversion – franchise fee £0, franchisee retains 90 per cent of income – subject to a minimum fee of £400 sales and £200 lettings per month (not payable for the first 3 months of trading)
Included in fees: All features of a cold start franchise, basic rebrand, ring fencing of existing portfolio income, no fees for first three months, ‘walk away’ break clause after 12 months.
Personal Agency Franchise (home based estate agency) – franchise fee £2,995 plus VAT, ongoing fees (after initial trading period) the franchisee retains 75 per cent of income, similar benefits to other options.
Costs: Total costs (circa) for set up and trading into a positive cash flow position: New cold start branch £55,000 (no salaries), Personal Agent £17,000 (no salary).
Timescales: On average a new cold start branch takes approximately 13 months to become self-supporting, while a Personal Agency takes around 10 months.
Message: With our franchise you will be successful, we will support you focusing on the three key areas: lowering costs, increasing income, expanding quickly and profitably. Our strengths are in marketing, technology, training and communication – all of the areas where you really need to excel.
USP: Simple… we are the UK’s largest independent franchise and we intend to grow; first and foremost a franchise business, we invest into our network and truly care about our partnerships. We offer the most advanced estate agency package in the UK and are passionate about selling and letting properties throughout our network.
Last word: We have recently launched a new franchise website where interested parties can find out further information and watch videos on our proposition.
Spokesperson: Nick Byrne, Director
Facts & figures: Waterside Properties is celebrating 25 years. Two franchises in Poole and the Isle of Wight, plus network affiliate agents. Head office: Port Solent, Portsmouth, with five staff. Turnover for last financial year: just under £1.3 million.
The new franchisees are both experienced agents, all our new Network Affiliate Agents are independent agents wanting to use the unique Waterside Properties marketing platform, but retain their identity. We plan to shortly announce a new franchise, with someone from a sales and marketing background, with considerable commercial experience, who will undergo an intensive three-month training programme before their own franchise opens.
Fees: £20,000, plus seven per cent of annual turnover. The franchise fee includes access to the Waterside Properties marketing package, which includes the London and Southampton International Boat Shows, the opportunity to advertise at very competitive rates in publications such as All At Sea, Coast magazine, and have all properties featured on Waterside’s website. Typical average total set up cost in the region of £40,000 to 60,000.
Timescale: A typical branch would expect to be in profit during the second year. With our unique position, a Waterside Properties office only has to contend with prevailing market conditions, not a dozen or so direct competitor agents, as a typical new start office on the High Street would have. And of course, the waterside market, whilst not immune, it has not been hit so badly as the mainstream market.
Message: Be prepared to put in the graft! It is an enjoyable way to earn a living, the waterfront is a great place to work… but it will not fall into your lap, you need to put the effort in.
USP: Our position in the market. No other agent in the UK, with the exception of a very few localised, small, one office companies specialise in waterfront homes.
Last word: This is our market, what we are known for and we are the very best at it.
Spokesperson: Sussanne Chambers, Managing Director
Facts & figures: Established in 2009, set up with the aim of creating a dramatically different working from home or non High Street office, Estate and Letting Agency. Three years on, our vision has become a reality with established HomeXperts Personal Agents getting over 90 per cent of business from referrals made by previous clients.
HomeXperts has 19 franchisees, with training academies in September and January 2013 for the next group. In the past 12 months, nine new franchisees started and a number are going through the set up steps now. Head Office in Rugby, with superb flexible meeting and training facilities. Head Office Key staff include, a Franchise Support Manager, Head of Training, Franchisee Development Manager and support staff.
Some franchisees are from the estate and letting industry, others have had previous industry experience, most have had no experience at all. What’s clear, when you look at HomeXperts franchisees, is that they all have the same qualities and attributes, a desire to want to make a difference within their market place by offering top quality customer services and being known for being the best. It’s amazing to see how our new franchisees, having been through our training academy and given a structured marketing plan, go into their local markets and do so well.
Fees: £13,995 plus VAT. Franchisee will also need a marketing expenses budget to get their business off the ground. The initial fee includes a full business package with territory, full training to NFoPP standard, access to our marketing suite, individual website, launch marketing plans and equipment pack including wide angle SLR camera, iPad, laser measure, for sale and to let boards and marketing materials.
Costs: A set up and marketing budget of approximately £6 – 7,000 making the total investment around £20,000. We are approved by Lloyds TSB Bank who will lend as much as 70 per cent of the costs. HomeXperts do not set the fee that franchisees charge their clients. Our model is based on quality service where our franchisees charge a reasonable amount for the service. This takes into account regional variations and allows franchisees to make there own decisions about fees.
Timescale: Most HomeXperts franchisees make a profit within their first year and move towards significant profits within years 2 and 3.
Message: We advise potential franchisees that the way to succeed is to follow the model, we can clearly demonstrate how well it works by our existing franchisees experiences. We always try to err on the negative side when completing financial models with potential franchisees. It is highly unethical as a franchisor to exaggerate earning potential or minimise how hard the franchisee will have to work to succeed.
USP: The flexibility of HomeXperts enables franchisees to compete in their market by setting their own fees based on effective competitor analysis. Our marketing suite offers 80 high quality documents, so franchisees can compete with independents and large corporates.
Last word: I am so proud of the way that the HomeXperts franchisees embrace our customer centric model and how proactive they are at providing a service that delights and surprises their clients.
Spokesperson: Alex Clark Established Alex Clark Lettings 1992 and the Alex Clark Lettings Franchise 2011. Five franchisees – all in the last 12 months, Head Office: Cheltenham
Locations: Gloucester, Hertford, Weston super Mare, St John’s Wood, Kingston upon Thames.
Franchisee backgrounds vary from Property surveyor/manager, Builder, Ex Naval Officer, to Senior IT Manager and an Architect/Property developer
Fees: Option 1 – Premises based. Franchise Fee: £15,500 + VAT (Plus £16,500 for equipment) Option 2 – Home based. Franchise fee £10,500 + VAT (Plus £9,500 for equipment). Ongoing fee paid to franchisor: 10 per cent.
Costs: Total cost to set up: £80,000 including working capital, up to 60 per cent can be financed.
Timescale: We advise our clients that they will be self supporting within approximately 10 months.
Message: Martyn Ward, Franchise Manager says, ‘From the very beginning of our recruitment process we tell our franchisees they need to ‘work hard and follow the system.’ Following their certified training course we continue to offer an exceptional level of support to help them achieve success in their businesses.’
USP: A key differentiator is Alex’s 20 year experience of building up his own business into the number one lettings agency in Cheltenham. Franchisees are attracted by the opportunity to replicate in just five years what it has taken Alex 20 to learn; it is this that allows Alex Clark Lettings Franchise to say ‘We know what it takes to be number one’.
Last word: Alex’s franchisees also receive market-leading training with a Level 2 BTech certification in Residential Lettings and Property Management.