Business model differences between a real estate franchise and an independent agency are less dramatic than you might think.
By Donna Shryer
You know the difference between a franchise real estate agency and an independent agency.
Or do you? With the internet’s rapid growth, America’s post-Great Recession emphasis on entrepreneurship, franchise models loosening up, and independent brokers facing fewer challenges, yesteryear’s pros and cons for each respective path have changed. In other words, franchise and independent agency attributes are in many cases no longer black vs. white, good vs. bad or right vs. wrong.
Here are several traditional pros and cons for each path—along with counterpoints.
Office Culture and Support
Culture: There are no categorical pros or cons when it comes to office culture. Whether you choose to play with the “big boys” (such as Century 21, Keller Williams Realty, Inc., or Coldwell Banker) or go the independent route, office attitudes and behavior characteristics have nothing to do with agency category and everything to do with an office’s unique environment. To this point, it’s essential that you become familiar with an agency’s culture before signing on, emphasizes Edward Hru, CRS, broker/owner of Century 21 Roo Realty, in Orlando, Florida. “Is it a happy group that gets along? Do you think you’ll fit in? Every office culture is unique,” Hru says.
Management Support: Another area where agency category is irrelevant pertains to management style. Prominent, nationally franchised real estate companies and small, independent boutique agencies are equally capable of exemplary mentoring. “Some franchises are better with organized training programs, but one-on-one mentoring and general management support is an attitude that’s specific to an agency,” says Merlin J. Weaver, CRS, REALTOR®, Berkshire Hathaway, in Wyomissing, Pennsylvania.
Brand
Franchise Pro: According to an Inman Select Special Report, The Shift Toward Independent Brokers, brand awareness is considered a big franchise advantage. “Being part of a franchise gives you immediate company recognition, and there will always be clients who only want the names they recognize,” Hru says. “I feel that brand recognition also gives me the power to recruit a higher level of new and experienced agents.”
Franchise Con: Weaver agrees, but just so far: “Eventually you’re paying a lot of money for nothing, because a seasoned, savvy REALTOR® has a client base that comes to him or her,” he says. “The REALTOR® is the brand—and it doesn’t matter what it says on the office door.”
Independent Pro: Tracy Shaffer, CRS, REALTOR® with Denver-based Your Castle Real Estate, LLC, feels that being smaller and localized gives her team the ability to steer branding efforts into specific developing niche markets, which eclipses national visibility. “Because we’re independent, we were able to quickly bring our brand into a unique creative community here in Denver and change the neighborhood’s paradigm from ‘starving artists’ to ‘thriving artists.’ We put a lot of people into their first home and helped some residents buy multiple properties, which gave them a steady income based on rental properties. ” Shaffer says. “This kind of flexibility to focus on one community gives independent real estate agencies a competitive advantage.”
Perhaps it’s this “competitive advantage” that explains why more than 8 in 10 U.S. brokerages today are independents. It may also explain why 97 percent of indie brokers say they aren’t considering joining a franchise brand and 71 percent of affiliated brokers report they’ve at least thought about going indie.
Independent Con: Flying solo, Weaver feels, may not be the best decision for a newer agent. “I realized early on that without your own personal brand—meaning your reputation—it’s tough to build a business as a non-franchise,” Weaver says. “You’re facing a massive financial outlay to create a brand, website presence, marketing materials and a listing presentation—and all the while trying to keep everything fresh.”
Education and Training Resources
Franchise Pro: Bill Kuhlman, CRS, group leader with the Kuhlman Residential Group at Keller Williams Boston South West, went solo for 24 years and then moved to a franchise, where he finds having access to high-level education and other resources is a big plus. At the same time, Kuhlman says, “I’m not locked into a template. If I choose to do things a little differently, KW supports me. It’s the best of both worlds.”
Franchise Con: While REALTORS® generally agree that franchise companies have a deep pool of educational and training resources, Erica Ramus, CRS, broker/owner of the Ramus Realty Group, an independent boutique agency in Pottsville, Pennsylvania, feels that once a REALTOR® reaches a certain level of business savvy, the franchise company’s education tends to be too basic.
Independent Pro: To beef up educational opportunities for her team, Ramus keeps a close watch on CRS and NAR classes. “CRS offers free and for-a-fee classes and webinars,” she says. “There’s a whole library of tools! If you know where to find the best education, I feel that independents can match every franchise opportunity.”
Independent Con: With experience on both sides of the fence, Kuhlman not only feels that the education and training resources are less plentiful and harder to find for independent brokers, but so is the office support to back up resources. “With a franchise, I now have access to managerial and administrative support, which allows me to work with more clients while giving me more time for my personal life,” Kuhlman says.
The Internet
For the franchise, internet pros largely circle around robust corporate digital marketing budgets as well as the fact that buyers and sellers’ often click first into websites associated with familiar power names.
For smaller independent agencies, the internet pros of note include a world of connections to marketing tools, analytics, trend analyses, relocation referrals, client leads, educational and training tools, and a host of additional resources once considered nearly insurmountable challenges for smaller, independent agencies.
At one point, David F. Joslin, Jr., CRS, managing partner with Century 21 Advantage Gold in Newtown Square, Pennsylvania, went the indie route, and he recalls finding it difficult to weave his way through service providers. However, as the internet took off, so did his access to reputable providers. “I found an organization called BreakthroughBroker.com—an online business consulting tool that was helpful to me as an independent broker,” Joslin says. “Seeking out these organizations takes time—but the resources are there.”
The internet took Ramus to Leading Real Estate Companies of the World®. “It’s similar to a franchise system for independents. I can download education modules and join networking groups—which is a huge benefit for relocations and referrals,” Ramus says. “They offer resources and support that make it easy to find information on marketing issues and day-to-day operations.”
Turning to a savvy online presence, once considered an enormous advantage reserved for the franchisee, Gabe Caporale, CRS, managing broker, Caporale Realty Group, in Elmwood Park, Illinois, has these words of wisdom for his fellow independents: “When you’re not paying out franchise fees, you have a bigger budget to hire tech experts, like a webmaster, social media specialist and online content developer.”
There are also free digital solutions that can be easily found at realtor.org and inman.com.
Entrepreneurial Spirit
Franchise Pro: As America continues to move through the age of entrepreneurship, franchises have loosened up their business models. However, Kuhlman feels a certain amount of freedom always existed: “Most real estate agents have an independent streak, and if you try to box us in, we’ll resist,” he says. “Franchisers know that. Sure, they have policies and procedures, but there’s often a lot of latitude between the lines.”
Franchise Con: The major franchisers have some work to do as far as communicating their openness to individuality. Some REALTORS®, Ramus says, still see “the franchise as an office in a box.”
That opinion may account for the fact that 27 million working-age Americans are starting or running their own business. That, according to a report from the Global Entrepreneurship Monitor, is a record high.
Independent Pro: Ask any REALTOR® for the one word that best describes owning or working for an independent agency and that word is usually “freedom.” It’s also a word often associated with entrepreneurship.
The creative freedom is obvious, but here’s something else to consider. “Without having to pay franchise fees, I have the freedom to invest in localized marketing, regional associations that promote my business community, and I can support regional charities and functions,” Caporale says. “I would much rather donate time and money to my community than to a franchise.”
Independent Con: All that freedom requires a fiercely independent personality and work style—as well as time to make everything flow, since corporate resources are not within reach. Joslin, for example, left the independent world for a franchise because he didn’t relish quite so much autonomy. “I spent a lot of time pounding my head against the wall and constantly asking myself, ‘What resources are available to me as an independent broker to guide me along in business?’” Joslin says. “On the other hand, with a franchise, I still have flexibility to effectively run my business with the added bonus of unlimited resources at the ready.”
