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Franchise model well-suited to challenging market, says leading agency

Winkworth, the agency which released its 2017 results this morning, says the franchise business model it supports is more resilient than others to the market changes seen in recent years.

“Our franchisees have been able to achieve average turnover of almost £500,000 per office, well above the average turnover of our franchise competitors” explains non-executive chairman Simon Agace in a statement to shareholders.

He says the firm has 100 medium-sized branches, each individually-owned.

“This business model makes us attractive to incoming franchisees as they are able to achieve more than they could were they employed at a top level elsewhere, especially at a time when many are scaling back their operations. Winkworth's efficient and economic logistics systems allow our franchisees to focus their efforts on servicing their clients and carrying out viewings” he adds. 

Agace also predicts market consolidation in the near future.

“We do not believe in developing competing brands, nor do we see any value in acquisitions at present. We expect to see some market consolidation as like-minded, non-competing companies consider merging as a way of achieving cost savings and growth. We will ourselves be alert to such opportunities” he says.

Over the course of 2017 - figures for which were reported to the City this morning - Winkworth’s revenues of £5.42m were broadly the same as the year before “despite challenging market conditions” says the company. 

Pre-tax profit was £1.38m, very slightly down from 2016’s £1.42m. 

Rental income increased to account for 46 per cent of total revenues, while seven new offices were opened and three re-sold to new management.

Chief executive Dominic Agace has told shareholders that the firm saw “a sustained rise in sales activity in central London” where demand had increased following price falls of some 15 per cent since the stamp duty changes of late 2014. 

Winkworth’s sales revenue in central London rose by 16 per cent last year, with an increase in transactions of eight per cent. “We recorded a rise in average percentage commissions, reflecting the value that customers put on trusted advisers in an uncertain market” says Agace.

Gross rentals revenue grew six per cent in 2017 and the firm’s corporate rentals department “continued to support above-trend performance, with 139 deals across the network with 61 different companies adding £283,000 in gross revenue to those franchisees with markets which are the most attractive for corporate relocation.”

The company says it is now nearing its goal of a 50/50 split between lettings and sales - at the end of 2017 its revenue split was 46 per cent lettings and management and 54 per cent sales, up from a 44/56 split in 2016.

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