RE/MAX International has announced a record year in both franchise sales and sales associate growth, defying the trend of consolidation of small to mid-size brokerage firms. Other firms, not quite ready for reporting, also hint that their year-end figures will reveal record sales. Is franchise growth the next trend to watch?

A look at Re/Max's stats indicate that franchise growth is here to stay. In its 29th year of consecutive growth, Re/Max could be the budding AOL of the real estate industry. Begun with its concept of 100 percent commissions for sales agents, who chip in on office costs, sales associate membership has risen to 64,128 at year's end, an increase of 6,658 for the year, representing growth of 11.6 percent. Franchise sales also set a new record at 592 during 2000 -- a five percent increase over the previous record set in 1999. The global franchise network ended the year with 3,993 opened franchises on six continents in 35 countries and eight territories.

Let's put that into perspective. Almost 600 new offices and over 6,500 agents were added to the Re/max franchise brand juggernaut. Compare that to some of the dotcoms, who are backed by millions in venture capital but only have a ground crew of dozens. Homebytes for example is now adding to its staff of agents after its recent layoffs of redundant personnel due to its merger with Owners.com. The lean business model calls for a national presence of brokers who are licensed to do business in each state. Some states have residency requirements. Other states don't, allowing Homebytes to keep brokers who are multi-licensed on staff. Operating out of central business offices, the automation-driven brokerage is able to do business with 30 agents nationwide, a number of field brokers and about seven brokers on staff. But is the national expansion of e-brokers a threat to the franchises? Only consumer acceptance will tell. So far, the dotcom discount savings model has a niche that it is serving well, but the industry has a long way to go before a venture capital backed company can overtake a major franchise.

Why? Commitment. A dotcom is only as good as the commitment of its backers. Having a great business model isn't enough. Just ask eHome which failed to obtain additional investment from venture capitalists and is now retooling its business model to leverage its much admired online client management and transaction system.

What seems to be signaling a greater trend is that brokers are looking for something more to sink their teeth into, from better ways to leverage their hard-won experience to creating exit strategies which are in short supply in the real estate industry. The average Re/Max agent is a 10-year industry veteran who may have the executive personality it takes to run a brokerage, yet is daunted by the costs of starting one. For these risk-takers, owning a franchise is the answer.

"Last year we had an excellent year in franchise sales, which has a lot to do with the fact that brokers are realizing that the challenges facing them in the industry are formidable," says Daryl Jesperson, president of Re/max International. "It is important to have someone on your side that is going to help you through that."

Brokers today are facing the same set of challenges, explains Jesperson, with five problems in common - how to recruit, train, and retain agents, make a profit, and expand. "Franchises are a lot about brand awareness," explains Jesperson, "and a lot of it is philosophical. If you were to take the traditional way of addressing those five problems you would recruit from the general population of licensees, you would buy a training program, and retaining those agents is where the model usually breaks down. After a couple of years of your nurturing them along, they all of a sudden one day decide, "I don't have brand awareness, the training I want, prestige, or something," and they jump to another firm.

"That's where it breaks down. There is a lot of economy of scale in consolidating the back room," levels Jesperson.

No stranger to controversy, Re/Max is still battling "traditional" brokers office by office in some areas. Only recently the company settled a lawsuit in which another company was attempting to restrict and lower commissions copaid to Re/Max agents by justification. Why? This brokerage felt that Re/Max has an unfair recruiting advantage with its 100 percent commissions model, giving it the opportunity to recruit good agents from other brokerages.

"Philosophically they (agents) look at us and look at their alternatives," counters Jesperson. "There are brokers who love to bring in new people to the business and nurture them along, and that's fine. It brings vitality to the business and that brings the average age of agents down. Then there are others who are frustrated with that approach, so philosophically you buy into one side or the other. It is seldom that brokers who want to become franchisees are weighing the difference between us and Coldwell Banker."

So far, Re/Max and Jesperson has a lot to be confident about, but that doesn't mean the company is taking success for granted. The company plans to continue to support the franchisees with strong training programs, seminars, television programming for agents, conventions and other brand-building team efforts.

"It is a consolidating industry," muses Jesperson. "and technology is one of the mitigating factors. You aren't seeing many people start new borkerages and part of that is the capital expenditure. Twenty years ago your technology investment was an IBM Selectric. Most people who came through the franchise program were individuals. Today, you see more partnerships between several people who are combining their assets to start a business. The commitment is far greater, and you have more at risk. The more you have at risk, the more likely you want to hook up with something that is proven.

"We're like McDonalds. Nobody says they make the world's best hamburger, but their franchises sure make money. Ours do, too." says Jesperson.