Small is beautiful’ is a mantra that many business owners endorse and a small firm is certainly nimble, but there are benefits in a bigger business, too – economies of scale, buying power, legal expertise on tap. For an independent owner, franchising offers the best of both worlds. Perhaps the most important element isn’t the brand itself but the behind-the-scenes support on offer, and nowhere has this been more evident than with the COVID-19 pandemic.
Independents had to try to cope on their own with a plethora of issues ranging from business rate rebates, grants and loans, to furloughing staff. Franchisees, on the other hand, had a huge level of support, with franchisors giving detailed advice on how to deal with these complex issues, and in some cases taking up the cudgel on their behalf when local councils didn’t play ball.
We will come out of this as a business far stronger because of the support we have been able to provide the network and the team spirit of being part of Property Franchise Group. Gareth Samples, Property Franchise Group.
Gareth Samples, CEO of The Property Franchise Group, said that as soon as COVID-19 appeared on the radar the company put together a support team of people at head office who were there solely to answer questions and offer advice.
Help and advice
“A big part of the benefit of a franchise is that instead of having 250 separate branches finding out stuff for themselves we can centralise that – communication is massively important when things like this happen,” says Gareth.
“The first week to 10 days was very much about panic – “I’m not going to have a business, how am I going to survive?” “Then the government came out with some unbelievable support with the furlough scheme and CBILS and business rate grants, so we were able to quickly capture that and communicate it to our franchisees.”
The group – with brands CJ Hole, Ellis & Co, Ewemove, Martin & Co, Parkers and Whitegates – had a retail premises expert on hand to talk to landlords and renegotiate rent terms.
“That helped during the first three-week period,” says Samples. “It was much appreciated by franchisees and it was really tangible – there was money and there was a way forward during the crisis. We were able to allay that panic and fear and help to get some pretty good results for them. They then started to realise what furloughing would mean in terms of halving their wage bill.”
“Humberts is a well-established, national brand, trading for over 175 years, with a reputation for good old-fashioned values, respectability and professionalism,” says Director, Tim Stephens.
The firm is positioned at the middle to upper end of the marketplace and specialises in properties of “character and individuality”.
Business owners benefit from a national network of offices and shared databases of clients and applicants. The firm also uses its muscle to win volume discounts on portals and with national advertising.
All offices use the latest proptech allowing them to work remotely. The chain has been offering advice throughout the lockdown, on top of the usual network benefits.
The franchise is based on five-year licence with the option to renew, or you can purchase an area in perpetuity. There is an initial £5,000 charge, with an ongoing monthly management fee of £1,000, plus a £100 per month marketing fee.
Humberts is currently offering an opportunity for existing agents to run their own branch of the franchise in strategic locations: London, Kent, Wiltshire, Hampshire, south Dorset, west Devon, the Cotswolds, Shropshire, Herefordshire, Cumbria, Hertfordshire, Northamptonshire, Essex, Suffolk and Lincolnshire.
He says that a number of franchisees have reported they made more money in April than for a number of months. “All of a sudden they were going from that fear of ‘I’m not going to have a business’ to ‘Blimey!’ – some are even looking hard at whether they need to take back all their staff when furloughing ends.
Andy Bushell, Franchise Sales Director at Hunters, reports a similar story of grateful thanks for hand-holding through the crisis.
“When lockdown started we had 200 small businesses whose franchisees were very concerned,” he says. “They were all having to get through furloughing, CBILS loans, business rate grants. It was a case of “How do we get through, how do we apply for all that,” he says.
Hunters put together a full advice and guidance package, with two live webinars every week, frequent coronavirus updates for owners and WhatsApp groups pushing information about everything they needed to know.
In lettings, we have people that are full-time, purely focused on regulation and compliance legislation; it’s such a minefield. It’s very difficult for a small business to keep up with all the changes. Andy Bushel,l Hunters.
There was even a CBILS loan application spreadsheet, setting out all the information you needed to apply for the scheme.
In addition, since training is allowed under furlough, many franchisees have been using the lockdown as an opportunity to boost staff learning.
“I think the reason we will come out of this as a business far stronger than we went in is because of the support we have been able to provide the network and the entire team spirit of being part of Hunters,” adds Bushell.
Meanwhile at Belvoir, the UK’s largest franchise group, CEO Dorian Gonsalves says the strength of the franchise business model has come into its own during the COVID-19 crisis, helping agencies to survive and thrive.
“Monumental efforts have been made by everyone, and I am extremely proud of all brands within the entire franchise network,” he says – other brands are Newton Fallowell, Northwood and Lovelle. “Everyone is benefiting from the incredible efforts of our franchise support team, who are all now working from home and using technology to provide enhanced support to the group.
“Belvoir franchisees have fought like lions during lockdown to enable them to get their businesses into a position where they are able to operate and survive this challenging period.”
People are now very much looking forward to coming out of survival mode, leaving lockdown behind and moving into preparation mode so that they are ready for whatever challenges lie ahead.
The group also put together a series of daily webinars for franchisees, with industry experts talking on a wide range of issues such as finance, grant applications, mental health issues, marketing, IT and compliance.
Franchisees are also regularly attending online regional meetings to network with each other and members of the franchise support team, providing valuable information and much needed moral support.
“The webinars have been very well received, and we are now planning a new series to help offices prepare for coming out of lockdown,” says Gonsalves. “The feedback I have received from around the network is that people are now very much looking forward to coming out of survival mode, leaving lockdown behind and moving into preparation mode so that they are ready for whatever challenges lie ahead.”
The largest estate agency in the world by agent count, Keller Williams has 192,000 agents in 44 countries selling more than one million homes a year, and has ambitions to be the UK’s largest agent.
“Not only does our brand have huge credibility, but it’s arguably the only truly global real estate business and that packs a big punch when talking to potential sellers. In the UK we are growing strongly and already have 200 agents partnered with us,” says Ben Taylor, CEO and Regional Operating Principal at Keller Williams UK.
“The ethos, the training and the systems that Keller Williams employs for its agents are designed by agents for agents and so we are not just a property business but also one of the world’s most recognised training companies,” he says.
The company is spending £800,000 on prop-tech over the next few years to help agents and their customers. There is key support from a tried and tested organisation, too. “You are not left to fend for yourself and this is especially important at times of challenge as we face now,” adds Taylor.
The cost of buying a franchise is complex, and varies per territory. The agent retains up to 90 per cent of the selling fee once they hit a ‘certain threshold’; prior to that they retain 63 per cent.
COVID-19 provides a graphic illustration of the support a franchised brand can offer business owners. One key benefit for those who currently have a sales-only business is the additional revenue stream from lettings.
All the franchises we spoke to operate a substantial rental business, ranging from 50 per cent of total income at Hunters to 70 per cent at The Property Franchise Group and 80 per cent at Belvoir. The advantages are clear at times like this, with sales stalled due to COVID-19 – preceded by Brexit and the financial crisis of 2008. Tenants continue to pay rent, even if a small minority may find themselves in difficulties.
Property rentals, though, are fraught with legal issues, and this is where a franchise comes into its own, providing all the help you need with compliance – which for a small company can be a minefield. For Hunters, bringing on board existing independent agents is a key area of business, and those without a lettings arm will be given all the help and support they need to set one up.
“We have people that are full-time, purely focused on regulation and compliance legislation; it’s such a minefield. It’s very difficult for a small business to keep up with all the changes.” says Andy Bushell. “It’s been, over the last 12 months, the reason people have joined our network. We can look after the property management and their property accounts while they get to grips with lettings, because it is complicated to make sure everyone is doing it right, within the law.”
Another key benefit is marketing – all the franchises look after this for owners, paid for from a national pot. Increasingly the marketing spend is focused on digital, with social media at the forefront of campaigns. They do deals with Rightmove and Zoopla, resulting in significant savings over the cost to an independent.
For Hunters the marketing contribution is two per cent of turnover, at Belvoir it’s one per cent, and at The Property Franchise Group it’s decided annually by a board of franchisees – this year it’s £350 per month. The cost of buying a franchise vary. At Hunter’s there is no upfront fee for existing businesses to join – the firm even pays for new signage and while the monthly franchise payment of eight per cent of turnover.
At Belvoir the initial cost of buying a franchise is £22,500 and the management fee is 12 per cent of turnover, paid monthly.
At The Property Franchise Group joining cost is £10,000 to £20,000, depending on territory size, the ongoing monthly fee is nine per cent of turnover.
The future is bright
So are franchisors positive about the prospects for the housing market over the coming months and post lockdown?
“I think agents will come back slightly differently; a little leaner, staff-wise,” says Gareth Samples.
“The market will track at 70-80 per cent of a normal year in terms of residential sales. There’s always a housing shortage, so lettings will be as strong as ever.” Where he thinks there will be change is with the growing emergence of hybrid online/physical estate agencies – the firm’s Ewemove brand is the largest and most successful hybrid agency in the UK.
Over at Hunter’s, Bushell agrees that the market will recover, though it may take time to adjust to the ‘new normal’. “A lot of it will come down to the lenders – as long as the lenders play ball, and the surveyors play ball over valuations; they will be in a difficult position.
“After the lockdown there will be people sitting at home thinking, ‘We want a bigger garden’, or just, ‘I want a garden – I live in an apartment and I want to move now!’”
BENJAMIN STEVENS ESTATE AGENTS
Unlike a typical franchise, Benjamin Stevens describes its team as ‘partners’. They work within the business but are all self-employed. The Partners have the marketing power of a chain, with back-office expertise, taking 50 per cent of commission for sales and lettings, Benjamin Stevens picks up the other half. An in-house team handles lettings administration and compliance. There are just two physical branches, in Edgware and in Bushey, with a large serviced office in Luton, though many people work from home.
Unusually, the firm is heavily sales focused, accounting for roughly 70 per cent of income.
Founder and MD, Steven Wayne describes his “perfect avatar” as someone who has been an agent for 15 years, maybe a branch manager earning £40,000 basic with £25,000 commission, but unable to earn any more as an employee. “They can’t get past that number – no progression, nowhere to go. They don’t have £100,000 to open up on their own but they want the freedom to pick up their kids at five o’clock, they want to enjoy their life. “Our model is perfect for people like that. They have the infrastructure, they don’t have to worry about running a business, they don’t have to worry about marketing, all of that is taken care of.”
Wayne is also interested in talking to existing business owners. “If the right person comes along and they’ve got an office we can always talk. There are always opportunities,” he says.
It’s free to join Benjamin Stevens, but there is a £250 a month fee to cover marketing and admin costs.