Among the biggest players in real estate are the leading national franchises, huge organizations with armies of brokers and salespeople. But now it seems that by some measures the franchise movement is stalled, and the question is why.
According to the 1999 member profile from the National Association of Realtors, the franchise movement peaked in 1997 when 37 percent of NAR's membership had a franchise affiliation. For 1999, the franchise constituency is down to 34 percent.
Franchises represent a trade. In exchange for an up-front fee and an ongoing percent of revenues, the franchisee obtains a branded identity, training, co-operative advertising, and standardized operating systems. In real estate, a major franchise attraction is the possibility of referrals from other franchisees across the county.
In the best case a franchise condenses the learning curve if you're building a new firm, and it provides additional growth potential and lower costs for established companies. These are significant benefits, so why have brokers turned away from the franchise movement?
To start, slipping figures for one year may be evidence of a short-term blip rather than a long-term pattern. In the mid-1980s, for example, franchise memberships dropped off, but then grew again at the start of this decade. We'll need to see what the numbers show in the next few years to determine if what we are now seeing is the start of a trend or just a passing fancy.
Franchisers traditionally compete against independent firms and they also compete among themselves. In the past few years, however, a growing body of information has emerged online, and new patterns of communication are evolving. The core values offered by franchises are being challenged by the new economies emerging in the Internet era. For instance:
Education. Real estate has benefited from an array of training options, especially those offered by members of the Real Estate Educators Association. But what's different now is the potential for "distant learning," the ability to take classes online, interact with instructors via e-mail, and share practical ideas on an informal basis through news groups.
Advertising. Regardless of how much advertising franchises produce, franchisees always want more. This is a constant matter of debate, but now brokers have new advertising options because of -- you guessed it -- the Internet.
A recent study from the Boston Consulting Group shows that, "classified ads, the biggest single revenue source for newspapers, are already beginning to shift to online formats: Online advertising revenues grew 240 percent in 1997 and 112 percent in 1998."
By 2003, says the study, approximately 15 percent of the U.S. classified market will be online. "Electronic classifieds are timely, searchable, comprehensive, and offer sight, sound and motion -- making them potentially superior from a consumer perspective."
The shift in advertising impacts franchises as well as brokers generally. If the web produces business via portals, search engines, and sites -- and many brokers can show that it does -- then do brokers need co-op ad campaigns and a national brand?
Referrals. For franchise organizations, independent web site development may not be such a good thing. Sites allow brokers to get business nationwide and at little cost, and sites also allow both consumers and other brokers to find local professionals. In addition, broker newsgroups are emerging as a powerful -- and free -- referral resource.
The referral issue involves more than individual deals. If members of a franchise send referral offers through a central franchise office, and if a franchise organization obtains a fee when referrals result in transactions, then would brokers be better off exchanging referrals among themselves online and without additional cost?
A related issue works like this: If a franchise organization builds a web site which includes franchisee listings, do franchisees have an equity interest in the site? After all, the site would not be possible without franchisee input, so why should the franchiser capture all the equity and income created by the site?
Franchises have much to offer, and those which put franchisee interests first and hold down costs are most likely to be with us in the future. Alternatively, the Internet itself is now emerging as a franchise competitor, something that should not comfort franchisers.
The Common-Sense Mortgage
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Whether financing or re-financing, whether you're a borrower, broker, or loan officer, this money saving, easy-to-read and well-organized guide is a necessity for anyone in the real estate marketplace. For additional information, press here.
Question Of The Week
Q Our agent rarely calls and this bothers us. We would like better communication so we can see how the home is being marketed and the level of buyer interest. How do we get the agent to be more talkative?
A It may be that the salesperson feels that he or she is, in fact, doing a good job of communication. The individual may not understand or see your perspective.
It's in the salesperson's best interest to communicate with you on a regular basis, so the first step is to call the individual, express your concern, and suggest a regular call -- say once a week, on a given day and at a given time.
Most brokers and agents would take such a call as a gentle reminder to communicate better and apologize for your concern. If that isn't the case, then speak with the company office manager or broker and explain what needs to be done.
Weekly Resource
There are a growing number of sites online which offer public property records. A good place to find such sites nationwide is maintained by the University of Virginia at its Property Assessments Online page. This is a good example of a site that combines simple design with lots of utility and value.
Is the Franchise Era Over?
