Real estate franchising falls

Independent real-estate brokers with computer capability are gaining strength and dominance in the 1980s marketplace.

During the entire decade of the '70s, the pendulum of influence within the industry was swinging toward national franchising of real-estate firms. That trend is now diminishing in favor of independent broker firms that are fully equipped to handle the needs of their local clientele.

A survey conducted by the economics and research division of the National Association of Realtors, a trade organization, shows that the appeal of the ''big name'' franchises peaked in 1980. Since then interest and membership in franchise organizations has been slipping.

Independent broker firms are growing and regaining stature in the current market.

The survey shows that independent, non-franchise broker firms actually earned more profit last year than did franchise-member firms.

The survey report, entitled ''Real Estate Brokerage Income, Expenses, and Profits,'' concludes:

''When the average measures of gross income and 'company dollar' are examined , the non-franchise (realtor) firms were larger than the franchise firms. Franchised firms allocated a greater percentage of company dollars to expenses and consequently recorded a substantially lower net income than did non-franchise firms.

''Non-franchise firms tended to be more profitable than the franchised firms.''

Most brokers who have terminated their franchise affiliation, or are now considering such action, point to high fees as the biggest franchise problem. Ineffective programs and poor performance in delivering relocation referrals are also points of serious concern.

A major broker in New Jersey, who heads a large multi-office firm, says he dropped his national franchise affiliation for a variety of reasons. ''I was promised the moon by the franchise salesman, but very little was delivered on those promises,'' he asserts.

''I gave up my previous relocation-referral business to plug into the franchise relocation service. That service resulted in virtually no referrals, so my total relocation revenue was, for the most part, down the drain. Also, the big-name association I thought would produce lots of new business just did not pan out that way. There was very little difference between the number of new contacts before and after we joined the franchise.''

Another broker, currently a franchise member in southern California, says he was also disappointed with the results of his big-name franchise affiliation.

''Those franchise fees are eating up our income,'' he says. ''And we're not getting the advertising support we were promised. Most of the advertising is keyed to promoting more franchise members. We're also disappointed with the lack of relocation referrals.''

The broker comments on why he feels some broker firms are still joining franchise groups: ''Many marginal firms today are really dying on the vine financially. They believe a franchise affiliation might just pull them out of their dilemma.''

Still another broker, a current franchise member, says he is generally satisfied with his franchise association. ''We've been working in a really tough market during the past couple years. We don't blame our franchise for the problems we've encountered.''

Many brokers have decided they need certain specialized services and programs offered by franchise organizations, but do not need an expensive package of programs. The big-name concept is apparently losing its dazzle.

Real-estate activities have become increasingly complex. Consumers seem to realize, more than ever before, that the most productive service is rendered by a broker who has the knowledge, professional expertise, and resources to do the job, not necessarily the one who carries a franchise name on his sign.

Highly effective independent broker firms can be small or large. The average firm now has only six sales associates, although that average size is growing.

''A trend toward larger firms is apparent,'' reports Jack Carlson, executive vice-president of the national association.

Brokers are generally becoming more knowledgeable and better equipped, including computer capability.

You've read  of  free articles. Subscribe to continue.
QR Code to Real estate franchising falls
Read this article in
QR Code to Subscription page
Start your subscription today