How many corporate estate agents are in your area? Lost count? Estate agency chains, often operating under different brands, are omnipresent in our high streets and with property stock harder to come by, it’s becoming tougher for independent firms to get established, or even simply survive.
Hardly a week goes by without another acquisition, as the corporates go on major buying sprees – snapping up independent high street agents. “We’re always looking for new opportunities to acquire property businesses and we have the funds and ambition to continue expanding,” said Peter Fuller, Managing Director of Romans.
David Brown, Commercial Director at LSL, which owns brands including Your Move, Reeds Rains and Marsh & Parsons, says that acquisitions are a key part of his firm’s strategy. “We understand that many independent agents have spent years in building their brand and reputation but have reached a stage where they need a helping hand to either grow their business or plan for their exit or retirement.
“We can provide that support and we are looking to acquire even more businesses this year – building on our success.”
With the big companies paying top prices, you too may be tempted to sell your business – but wondering which way to turn. “Prospective buyers need to know if the sellers are prepared to stay on after the sale and, if so, for how long,” said Adam Walker of Adam J Walker & Associates. “Some will not look at a business unless the owner agrees to stay on for at least three years. Some want you to leave immediately. Even if you do decide to stay, you need to bear in mind that some good buyers are not good employers.”
But there is a viable alternative to selling your business – joining a franchise.
JOINING A FRANCHISE
Working under a well-established brand, a franchise offers a proven business format with the initial and continuing support needed to increase your chances of success. You need to know if franchising is right for you and you are right for franchising. You also need to consider the options.
After months of deliberation, Liverpool agent Dan Pennington decided in 2013 to join Century 21 UK. At first Dan admitted to being “a little wary of a franchise” – he did not want to lose that ownership feel. “When you run your own agency, you want to be your own boss.” But after speaking to the team at Century21 UK he felt comfortable, “I would absolutely be my own boss and able to make and take decisions about the business,” he added.
If you take the franchise route, you pay an initial fee and, usually, a percentage of the profits. This enables you to use the established brand and the business format, receiving ongoing support and creating a capital asset.
“Two years on, I strongly feel that a franchise was the right choice,” Dan continued. “That support that I didn’t think I needed has been vital at times. Things like keeping up-to-date with changes in legislation, having a support network to bounce ideas off, a marketing department, the Century 21 website and property management system. All this is included in the fees.”
Whether you choose to carry on alone or take your business under a franchise umbrella will depend on personal circumstances, risk profile and experience base, according to Louise Reynolds, Director of Property Venture, “If someone is risk averse, does not have a strong business background or all-round skillset, or might just want to minimise their financial exposure, going down the franchise route may be a good option.”
Good strong branding is not just about getting your target market to choose you over the competition, it is about getting potential vendors and landlords to see your firm as the only one to sell or let their property, and at the highest possible price. “A network provides smaller individual businesses with a greater identity based on the dimension of the brand,” said Charles Roberts of Fine & Country.
Karl Jennings of Fine & Country agrees that there are many advantages to being a part of a major franchise network.
“At Fine & Country we are part of a recognised brand, potential clients know it delivers the highest standard of market expertise and professionalism within the luxury property market.”
Dorian Gonsalves, Belvoir’s Director of Commercial and Franchising, argues that many start-up agencies fail to succeed due largely to a lack of brand recognition. “Many fail because they don’t have the strength of a powerful reputable brand that will attract and retain the new landlords and tenants that are necessary for long-term success.”
Once a licence is granted the franchisee is free to take up all the franchisor’s services. “In Belvoir’s case this includes assistance with the selection of premises, contemporary office design and layout and a professional website that is constantly upgraded to suit the needs of clients and franchise owners,” Dorian added.
In an ultra brand-orientated society, companies such as Winkworth offer a name built up over 180 years.” James Trimble, Winkworth.
While it is widely recognised that joining an established franchise can be an excellent prospect for existing independent estate agents who want to “move their business to the next level”, as James Trimble, Director of New Franchising at Winkworth, described it, saying that joining a franchise is more than just a name over the door and on a business card. “In an ultra-brand orientated society, companies such as Winkworth offer a name and awareness built up over 180 years and have had dealings with hundreds of thousands of people across the generations. To reach a comparable level alone would take a significant amount of time, money and effort.”
Most franchisers are very clear about how much it will cost to join their network, and they give ballpark figures for ongoing costs, but they are more reserved when it comes to talking about how much money franchisees can actually expect to earn.
This reluctance is understandable, but James Trimble sees plenty of room for generating higher profit margins within a franchise network if the business model is right. “Those that believe anyone can join a franchise simply by giving away some of their income in exchange for a name are mistaken,” he added. “Franchise brands are always looking at how to make their network stronger, so look for agencies that have solid experience and a well-functioning business to join them. They will then help the company to add greatly to its turnover, increase its profile and market reach that results in greater gains for a small franchise fee.”
FIRST CLASS SERVICE
Aside from a greater level of return, firms that commit to the franchise model can also expect to deliver “higher levels of customer service,” according to Glynis Frew, Managing Director of Hunters. “Service excellence is an attitude, it starts and ends with each member of that network, from negotiators to back office staff, supported by professional training, personal development and ongoing assistance provided by the franchiser, designed to equip your company with the tools to exceed customers expectations.
Local expertise, knowledge and professionalism to help people get to where they need to be. That’s our motto.” Glynis Few, Hunters.
“Our franchisees are passionately committed to the success of their own businesses and will work hard to ensure they deliver what today’s customer wants,” Glynis added. “Local expertise, knowledge and professionalism to help people get to where they need to be – that is our motto.”
Some franchises insist that franchisees participate in annual training to continually sharpen their skills. At RE/MAX UK, for instance, a franchise partner must participate in 20 days training per year. This ranges from financials and running the business on an office owner’s level to full training on all aspects of sales, lettings and management under UK legislation.
Ray Finlay, Regional Director at RE/MAX UK, said, “Agents are trained in all aspects of the business over a two-year period. We are very strong on agent mentoring and our agents’ code of ethics.” “Our aim is to achieve market share based on minimal overhead to maximise profit,” he added. “Under our business model the RE/MAX system does not fail. Sometimes those within it do not implement it as trained to do so, but the RE/MAX system does not fail.”
DUE DILIGENCE IS CRUCIAL
If you decide that the franchise route is right for your company, there are key considerations. With plenty of brands, investment levels and business types available, you need to fully research the individual companies to understand each of the franchising models on offer and establish where the opportunities and pitfalls are. Only then can you start to understand which one is right for you.
- Adam J Walker & Associates www.adamjwalker.co.uk
- Belvoir www.belvoir.co.uk
- Century 21 UK ww.century21uk.com
- Romans www.romans.co.uk
- Fine & Country www.fineandcountry.com
- Hunters www.hunters.com
- LSL www.lslps.co.uk
- Property Venture www.property-venture.com
- RE/MAX UK www.remax.co.uk
- Winkworth www.winkworth.co.uk