When you are considering a franchise based business within a commercial real estate brokerage brand, there are some things to explore and investigate. Some franchise groups are not as good as others when it comes to the variety of services and support offered; they are not all the same in commercial property.
If you are going to pay franchise fees as part of your business model, then you should know that you are going to get the best support and branding to help your business thrive over time.
Time Passes Quickly
The ‘honeymoon period’ will soon be over after you start a franchise based commercial real estate office. Initially you will find that the money will disappear faster than it comes in. You will need a commission structure and business plan to get you through the initial start-up phase of the business. Your real estate team will need to focus their efforts.
Understand how the franchisor will be supporting your business intentions and activities over time. They have a vested interest to ensure your business success, so question them when it comes to business service support and interaction over time.
A Clear Fit for You?
So what can you do here to see if a franchise brand is a clear fit for your business intentions? First and foremost, you should speak to a good number of franchise offices and not just the shortlist of offices or business owners that has been given to you as part of your initial questioning or interview with the franchisor.
Here are some more ideas to help you explore the franchise business potential:
- Franchise fee structures will vary. In commercial real estate today, most franchise fee structures are between 7 and 12% of gross income generated and paid on a monthly basis. That gross income will come from the commissions of sales, leasing, and property management. Understand the fee splits, and determine how and when the franchise fees will be paid. You may be able to achieve a discount in your fee structure at the beginning of your franchise agreement. There is no harm in asking the question at that time.
- Consider the accounting requirements and reporting requirements to the franchisor on a monthly and annual basis. Exactly what will be required of you as a business owner when it comes to financial reporting and business compliance within the franchise structure?
- At the end of any franchise business structure, the separation process can be quite tedious and painful. Whilst it is good to consider how you may join in a real estate franchise structure, it is also important to consider how that relationship will come to an end. How easy would be for you to separate your business from the franchise brand should there be any problems in the future?
- Should you wish to sell your real estate business, how easy will that process be given the rules and regulations that apply to the franchise brand and current operating rules? There may also be processes and restrictions that apply to franchisee approval and selection when it comes to selling your business.
- Advertising buying power may be possible when it comes to promoting properties, both online and offline. Ask the questions to determine exactly how much value you can achieve in the marketing process online and offline within the franchise brand. Can you pass on that ‘buying power’ when it comes to listings for clients?
- Branding materials should be available at low cost to franchisees. All of your marketing materials should be available at a discount rate when compared to standard real estate business operations locally. Compare the costs of signs, banners, stationery, and business materials.
- Website initiatives should be understood from the outset. There will be particular rules and regulations that apply to obtaining domain names, website structures, website design, and property listings. Will there be an extra fee for that service? How much? Who will own the website and what will be the rules of use?
- Sales, Leasing, and Property Management training should be provided free of charge or at a low cost for franchisees. The group should provide specialized knowledge and training where required. In that way the brand can be strengthened and consolidated across a location, town or city. Ask about training and what is involved if you want to participate.
- Helpline services should be available for all member offices to tap into when they have issues with marketing, disputes, business activities, and staff management. How much helpline support will there be for members and is there a cost?
- Awards will usually be given each year across sales leasing and property management activities in the member offices across the group. What are those awards and how useful are they for you and your team with its required momentum and motivation?
- Product packages for listing pitches and presentations should be available for use. Check them out to see how relevant they are for you. What will be the cost of accessing such material?
- How will commissions be split with other nearby offices within the franchise brand? You will soon be listing, marketing, selling, or leasing properties in locations that cross over into another real estate office location or territory. Are there rules that you will need to adhere to? Will you have to share commissions? How will that be done? Would you consider the split arrangements fair and reasonable?
- Database solutions should be provided for sales, leasing, and property management applications. Who owns the data entered into the database? How efficient is the software when compared to the other commercially available software on the market? The really important question here is how can you get the data out of the software when you want to move on or sell your business.
- Business planning and succession planning should be available as a standard service for all franchisees. You will not be working in commercial or residential real estate for ever. How can you prepare to sell, or move on and exit the franchise system?
- What do other members think about service? Don’t fail to ask that question to lots of existing people in the group BEFORE you join up.
So there are some large and important things to consider here in commercial property brokerage activities as they apply to a franchise type business. Ask all of the questions before you sign up for a new franchise brand. As a basic minimum, do not overlook these questions as part of considering the move to a real estate franchise business model.