Comparing and contrasting the benefits of setting up or joining a real estate group as to opening an independent real estate office.

1. FRANCHISE VS.
INDEPENDENT
By Tony Morrison

2. Although this presentation has been specifically designed
for real estate agents looking to set up their own real estate
business to help them understand the positives and negatives
of joining a franchise group or going independent many of the
thoughts and ideas can be transferred to franchises in different
industries.
Although currently working for a franchise group I have also
worked as an independent so I feel I am able to give a rounded
perspective on the subject.
WHO IS THIS PRESENTATION FOR?
Tony Morrison
CEO Harcourts Tasmania

3. DEFINITION OF A FRANCHISE
• An arrangement where one party (the franchisor) grants another
party (the franchisee) the right to use its trademark or trade-name
as well as certain business systems and processes, to produce and
market a good or service according to certain specifications. The
franchisee usually pays a percentage of sales revenue as royalty as
well as sometimes an initial up front fee and in return gains some
or all of the following, (1) immediate name recognition, (2) tried
and tested products, (3) standard building design and décor, (4)
detailed techniques in running and promoting the business, (5)
training of employees, and (6) ongoing help in promoting and
upgrading of products. The franchisor gains rapid expansion of
business and earnings at minimum capital outlay.

4. The argument for going independent
STARTING YOUR OWN OFFICE

5. MORE FLEXIBILITY
As an independent you definitely have more flexibility with branding, marketing, pricing etc.;

6. A WEAK BRAND CAN BE DETRIMENTAL
All the benefits that an established brand brings obviously disappear if the brand is not strong

7. FRANCHISING = LOSS OF SOME FREEDOMS
Franchises have brand standards and corporate guidelines
which can very be helpful but can also be restricting.

8. CHANGE CAN HAPPEN QUICKER
As an independent you can come up with an idea, a new marketing strategy, a brand or colour
change and just run with it instead of having to go through a series of hoops and approvals from
the corporate team which justifiably have to protect the integrity of the brand.

9. SUITS THOSE WHO LIKE TO BE AN INDIVIDUAL
In an effort to support consistency and quality of brand
in a Franchise individualism can sometimes be stifled

10. ONE BAD APPLE CAN REFLECT ON ALL FRANCHISEES
As an independent you have total control over your integrity and service level whereas
in a franchise group poor performing sales people or offices in your group can have
a negative impact on your business.

11. EASIER TO APPEAL TO A NICHE MARKET
Franchises need to have more generic appeal to suit different locations and demographics
Independents can focus on a single product/price/style strategy .

12. EASIER TO CREATE THE FEELING OF BEING FAMILY
OWNED
Australians traditionally like working with people from their local area as we like the personal
touch of family owned businesses and Independents create more of a perception of being
family owned.(even though many franchises are also family/locally owned).

13. FRANCHISES REQUIRE A COMMITMENT OF TIME
(USUALLY 5 YEARS)

14. MARKET PERCEPTION
Independent agencies often market themselves successfully as being a boutique
Agency of a higher class. In reality this varies from agency to agency.

15. THE BENEFIT OF A WELL KNOWN LOCAL NAME
In smaller rural/regional areas where everybody knows everyone having the name of
your business based on a local identity may restrict opportunities to sell the business one
day but it will know doubt help build relationships with the community in the meantime.

16. FRANCHISES BRING POSSIBLE RESTRICTIONS
Most franchises will place restrictions on the territory you can sell in or
the sector you can sell in (e.g. Residential, Commercial, Rural etc.)

17. LEVELING OF THE PLAYING FIELD
Online listings via the web has leveled the playing field as any business on the web can now
become visible enough to sell houses if their search engine optimization is good enough.

18. PERSONALATTENTION
Independents can and usually do say, that due to their size, structure and flexibility that they
can offer more attention and a more personal experience. In reality this has nothing to do with
the business structure but has everything to do with the person running the business.

19. KEEPS ALL THE MONEY WITHIN YOUR COMMUNITY
Apart from franchise fees possibly going interstate to the head office franchises usually
have national agreements with a lot of service suppliers which possibly don’t help your
Local community.

20. FRANCHISE FEES ARE EXPENSIVE
Franchise fees vary from 5 to 8% of gross income. Plus there are also sometimes monthly
System/technology fees and maybe contributions to marketing which can be up to 2% of GI.

21. TOTAL SAY ON WHO YOU SELL YOUR BUSINESS TO
Franchises will want to protect their brand by vetting potential purchasers of your business

22. The argument for joining a franchise
STARTING YOUR OWN OFFICE

23. BRAND RECOGNITION
Brand recognition is a huge part of marketing success. If a company has been around for a long
time, their ads are subliminally ingrained into the collective consciousness of the populace.

24. STRENGTH OF BRAND FROM DAY 1
The strength of the brand allows you to trade off other people’s hard work. A strong brand can
help you win business as you start with an established presence in the market from day 1.

25. WEAKNESSES OF BEING AN INDEPENDENT?
Unless you are extremely well known in the area starting an independent agency
from scratch can mean that progress in the early years can be at a very slow pace.

26. BUYING POWER
On stationary, internet, marketing, newspaper advertising etc.;

27. SMALL CONTRIBUTIONS FOR BIG OUTCOMES
=
Due to the size and buying power of franchises small contributions to joint marketing
can get you far better coverage and value for money than doing something individually.

28. SPECIALIST DIVISIONS FOR YOUR BENEFIT
Most franchises will have specialist divisions for marketing, technology, training
and communications which as an independent you could just not afford.
Marketing
Division
Technology
Division
Training
Department
Communication
Department

29. YOU DON’T HAVE TO COME UP WITH ALL THE IDEAS
As an independent you have to be constantly thinking of ways to improve your
business, update your website and marketing and stay on top of technology
whereas a franchisor does all that for you.

30. NO NEED TO WORRY ABOUT UPDATING YOUR BRAND
That is for the corporate team to worry about

31. ACCESS TO THE BEST SPEAKERS &TRAINERS
Whilst independents can get access to great speakers and trainers at annual national
conferences Franchises provide this sort of training on an ongoing basis.

32. RECOGNITION
Opportunities to be recognised through award’s programs

33. FRANCHISES HAVE SYSTEMS IN PLACE THAT HAVE
EVOLVED OVER TIME
It’s been proven that systemised businesses have a very high success rate compared to
fledgling organisation's, which often have a lot of trouble building a foundation to work
with in their first few years.

34. NETWORKING OPPORTUNITIES
Franchises provide a multitude of opportunities to network with other like minded people.

35. A SUPPORT NETWORK
As an independent you are on your own, you don’t have a
network of people that you can talk to about issues

36. ABILITY TO TAP INTO A VAST BANK OF MENTORS
Within a franchise group there is a vast amount of knowledge and
Experience that can be tapped into for the benefit of everyone

37. ABILITY TO BE ABLE TO PROVIDE MORE SERVICES
Through affiliated companies- eg. Finance & Insurance brokers, Conveyancers, solicitors,
Utility connection companies, Depreciations specialists, Building companies etc.

38. TOOLS TO ASSIST IN RECRUITING
Marketing material , training programs, structured careers paths as well as associated partners
(previous slide) and access to different sectors (e.g. Rural ,commercial, body corporate)

39. MARKETING MATERIAL
Generally speaking more resources to develop and continually upgrade all marketing material

40. GENERALLY MORE IN-DEPTH AND ELABORATE WEB SITES
Franchises have the resources to generally create more elaborate and in depth web sites

41. ACCOUNTABILITY TO GOALS AND BUSINESS PLANS
Most good franchisors will help franchisees with business planning and then keep
the business owner’s accountable to the goals that they have set in the plan.

42. BETTER OPPORTUNITIES TO WIN CORPORATE BUSINESS
Franchises undoubtedly have better opportunities to win Corporate and institutional
business (e.g. -Government business, mortgagee in possession, Public trust etc.)

43. REFERRAL NETWORK
It is believed that franchises have larger data bases and access to more national and
international buyers. Theoretically speaking large franchises do have an extensive
referral network of affiliated real estate offices.

44. EASIER TO ATTRACT BUYERS TO A NATIONAL BRAND
It is generally easier to sell a business with strong national backing than an independent.

45. MARKET SHARE
Generally speaking the bigger profile that a larger market share brings
will give the franchisee an advantage over the Independent operator

46. YOU CAN CONCENTRATE AT WHAT YOU ARE GOOD AT
Do what you do best and outsource the rest
By being part of a franchise it allows you to do what you do best in selling houses, not
create marketing material, design web sites, set up systems, train a team and so on

47. WARNING – DON’T WASTE YOUR MONEY
Unless the product that the franchisor has to offer is good and you as a franchisee intend to
make use of their full range of support/training/ systems etc. then you are wasting your money.

48. REASONS FOR TAKING ON A FRANCHISE
• “In my mind I have no doubt that in the current climate the franchise
model is more relevant than ever. The real estate industry is one of
the most competitive in the Australian economy. To be focused on
growing a business to generate profit, manage people and develop a
successful team and stay up to date with the latest technology, while
in some cases, concentrating on your own sales, can at times feel
almost impossible.” Rob Forde CEO Harcourts NSW

49. ARE SOME FRANCHISES BETTER THAN OTHERS?
YESso do your homework

50. WHAT SHOULD YOU LOOK FOR IN A FRANCHISE?
• Strong leadership
• Market share
• Signs of growth
• Other good people already working there
• Little business owner/staff turnover
• Marketing that is constantly being upgraded and tweaked to stay ahead of
the pack
• A strong brand that is strongly monitored and protected
• A great technology platform
• A strong training program
• Strong Values

51. ARE THERE OTHER OPTIONS?
• Yes, some real estate groups are more like buying groups
• They offer little in terms of support, training, marketing or technology
• But you only pay a set fee per month regardless of what you sell

52. FRANCHISE VS INDEPENDENT
• Does it make a difference to the client?
• In Sept 2008 a consumer report on real estate concluded
that there was no indication of any difference in the levels
of satisfaction between sellers using independent agents
or franchised agents.

53. CONCLUSIONS
• There is room and need for both in the market
• A name on a door does not guarantee success
• A good independent is far better than a average franchise
• There are times when it is definitely better to go with a franchise
• A franchise will generally give you a quicker impact
• If you don’t have the right people on the bus it doesn’t matter which
model you choose.