The real estate market in the US is lucrative. However, only those holding a valid real estate license can sell real estate in the US. Most real estate agents work for an agency, a brokerage, or a real estate franchise. Every option has its merits and demerits. Here is an overview of how a real estate franchise works.
What is a Real Estate Franchise?
A real estate franchise is a large real estate corporation that sells its brand, logo, and other resources to smaller real estate brokerages and licensed Realtors. The franchisee can then use these resources to support their operations, but they have to pay a fee and comply with some rules.
One good example is the 1 Percent Lists real estate franchise, which offers one of the lowest buy-in fees. One Percent Lists is known as a “discount real estate broker” because of how they save money for their sellers. Although buyers still pay the traditional level of commission.
How Does a Real Estate Franchisee Work?
A real estate brokerage under a franchise is partly independent. The franchise operates as a brokerage and is free to pursue its real estate deals. However, the franchisee is also beholden to the franchise in several aspects.
The main aspect of a real estate franchise solution is that the franchisee brokerage uses the same brand as the franchise. This explains why there are multiple real estate brokerages across the US (and the world) operating under one brand name and logo. This is considered highly advantageous, and it is one of the reasons why people prefer franchises to other real estate models.
Real estate brokers under a franchise are also required to pay a fee to the franchise company. The fees may vary depending on the contract. Last but not least, the brokerage is also required to follow some rules – common rules include marketing and hiring standards.
Pros of a Real Estate Franchise Model
Operating under a real estate franchise model has many advantages, including:
- Popular Branding
The real estate market in the U.S. is very competitive, as mentioned. The most popular brands attract more customers than smaller brands.
Real estate franchises are usually big and popular brands with a strong footing and position in the market. Brokerages that buy into these franchises are allowed to use these popular brands to many advantages.
- Better Recruiting
Real estate agents are the metaphorical foot soldiers of real estate brokerages. Ideally, smart agents will help a brokerage grow its portfolio and make more sales. However, agents are very competitive and usually prefer working with popular and successful brands, such as franchises. Consequently, joining a franchise enables you to recruit talented and driven real estate agents.
- Shared Resources
Real estate franchises also share a range of resources with their franchisees, besides their brands and logos. As one example, buying into a franchise gives you access to their vast legal resources, protecting you from costly lawsuits.
- More Sales
Attracting more leads and making more sales are the biggest benefits of buying into a real estate franchise. For example, adopting the franchise’s brand increases your brand’s popularity. Additionally, recruiting better real estate agents also helps drive marketing and sales.
Cons of a Real Estate Franchise Model
Operating under a real estate franchise model also has its shortcomings, including:
- Limited Independence
Brokerages under a franchise are required to comply with rules set by the franchise, as mentioned. The rules vary from franchise to franchise, and some may feel restrictive.
- Costly Fees
Buying into a real estate franchise can also be costly. Fees vary depending on the franchise, and they may vary from less than $10,000 to more than $25,000. However, the cost is usually worth the benefits of being a franchisee – and it is a fraction of the cost of setting up an independent brokerage.
The real estate franchise model is popular for its many benefits, including a better market position and more sales. However, success depends on your chosen real estate franchise brand, so choose wisely.