Franchises in real-estate brokering

Franchising of real-estate brokerage firms is big business -- and growing fast. Emerging as a major factor in the marketplace during the 1970s, it will probably mature to full growth in the 1980s.

This strong trend toward franchising affects consumers in very significant ways. It can almost be compared to a revolution within the real-estate industry.

It's important to know that, when names such as Red Carpet, Gallery of Homes, or Century 21 appear in advertising and on office signs, the advertising firms are not owned and operated by those national organizations. Rather, each firm is independently owned and has simply joined that particular franchise group.

In other words, the firm's membership fee buys a variety of services from the franchiser as well as the right to use the nationally recognized name.

Joining a franchise organization is becoming widespread within the industry. More than 28 percent of all Realtor firms (members of local boards and the National Association of Realtors) now are affiliated with a franchise group. Two years ago, only 12 percent of these firms were franchise affiliated.

The trend has created an appealing investment opportunity for big business -- and not necessarily real-estate-related businesses. Companies that have recently become principals in real-estate franchise groups include those primarily engaged in stock brokerage, publishing, broadcasting, air travel, and other diverse activities.

The most recent announcement of a major firm launching a new real-estate franchise organization came from the Mayflower Corporation, one of the largest household moving firms in the United States.

There is considerable discussion and expectation within the real-estate industry that Sears, Roebuck & Co. will soon initiate such a franchise program. If this materializes, the country then will have both a major supplier and a major mover of household goods creating new profit centers by becoming actively involved in the real-estate brokerage business.

There are other reasons for large companies to enter the business as a franchiser. Take Better Homes and Gardens Real Estate Service, for example -- a division of the Meredith Corporation, publisher of Better Homes and Gardens magazine.

Robert Burnett, president of Meredith, tells why his company became a real-estate franchiser.

"We have always worked diligently to exploit in a positive way the benefits of our resources and assets," he says.

"One of these benefits is the name, Better Homes and Gardens, along with its stature in the housing industry. Our magazine has been a leader as an information source in the area of home construction and remodeling for many years.

"The fact that the real-estate market in its dynamic forum was responsive to such a franchise approach made it seem obvious that we should take this bold move. It all adds up to more service to the consumer, another opportunity to exploit in a constructive fashion the Better Homes and Gardens name, and to add to the corporate earning power."

According to a survey, recently conducted by the National Association of realtors economics and research division, most franchise-affiliated Realtor firms are medium size with 21 to 50 sales associates. Also, they are inclined to be newer firms.

The survey further indicated that the primary reasons for joining a franchise network are (1) to achieve identity with a national organization, (2) generate educational resources, and (3) benefit from more effective advertising programs.

This would indicate that most of the real-estate firms going the franchise route are the younger firms that place high priority on educating their sales associates and expanding their operations.

The most frequent gripe expressed by franchise-affiliated Realtors responding to the survey was the high cost of membership. Also, poor communications was a major concern.

At the same time, it is significant that nearly one-third of the responding Realtors expressed no complaints or indicated that they were totally satisfied with their franchise association.

What kind of concepts and services will members of these national organizations be offering home buyers and sellers during the 1980s?

According to a spokesman for Century 21: "Our member brokers will be able to offer a wide variety of one-top shopping services to their consumer clients, thereby saving a lot of time and inconvenience for those home buyers and sellers."

Century 21 is a comparatively seasoned franchise organization of independent brokers. At present it is the largest of all such organizations and includes about 7,500 members offices with 10,000 projected for the early 1980s.

As for specific services, now in place or planned for the near future, Century 21 points to the following:

"Relocation centers" will be strategically located throughout the country to provide special help and guidance for families making long-distance moves. Every office will be equipped with computers that will provide daily update information on local and national market conditions and factors.

Further, Century 21 plans to offer consumer investment services during the 1980s as well as a guaranteed home-sale program, new and creative financial services, a home warranty protection plan, moving services, and home decorating services, to name just a few, according to the spokesman.

One thing is certain. More real-estate firms will be affiliated with major national networks and franchise organizations during the next few years.