For many estate agents seeking to become entrepreneurs, the idea of starting their own business is undoubtedly daunting, especially when going it alone, which is why many people believe that they are more likely to succeed by following a franchise business model.
With an established brand, comprehensive training and professional support, estate agency franchises promise a guaranteed turnover, but do they really provide a short cut to a successful business?
Franchising of estate agents has long been popular in the US, but it is increasingly big business here, as national and international firms view the franchising route as the best way to expand their own business in the UK, creating fresh opportunities for start-up agents.
Franchise giant Winkworth, which opened seven new branches in 2017, is constantly looking to expand its brand presence in new areas.
The company recently announced two new office openings in Banstead in Surrey and Poringland in Norfolk, after signing up new franchisees, Andrew Booker and Richard Ward, as well as Jamie Moore, who between them have more than 40 years’ experience working in the industry and their respective areas.
“These new locations will help us to tap into new areas of the market, enabling us to reach and serve new customers, as well as providing more options and a better service for our existing client base,” explained Dominic Agace, Winkworth’s chief executive.
“We’re looking to expand in some key areas, but are always open to considering other areas as well and we’d love to have an initial, confidential conversation with anyone who’s interested and would like to know more,” he added.
From a marketing standpoint, a franchise offers the benefit of brand recognition, which means that you will spend less money and effort on establishing the business to potential customers.
One of the most important developments in the UK travel industry in more recent years, for instance, is the growth of the ‘budget’ or ‘no frills’ airlines, such as Ryanair and easyJet, which both used new technology and other methods to sell seats, rather than through traditional high street travel agents.
easyJet, like Ryanair, aim to keep costs low by reducing the costs and additions which characterise ‘traditional’ airlines, and so when it was announced in 2014 that easyJet would be taking on high street estate agents by launching its own online business serving property-hunters, unsurprisingly many experts in the industry sat up and took notice.
Four years later, and easyProperty, which last year relaunched its business following the merger with the Guild of Property Professionals, is now one of the most powerful brands in the industry.
“The easy brand resonates with 97% of the UK population, so having a huge brand behind you like this, first builds trust,” said easyProperty’s head of operations Adam Day. “The easy brand is all about value, and this is what easyProperty is offering the end consumer.”
He added: “We have over 150 licensees, with local property professionals covering over 400 territories.”
Most franchises grant an ‘exclusive territory’ covering a certain number of households as part of the rights given under the franchise agreement, which is designed to assure the franchisee that they will have some area in which they can market and operate under the franchise brand without any competition from another franchisee or even the franchise firm itself.
Although franchisees are able to trade exclusively in a specific territory, those thinking of signing up must ensure first that they are happy with the method used to define the boundaries of the territory, and that it has a sufficient number of potential customers to enable them to build a successful business. This is where disputes can occur.
But one thing that is not disputable is the high level of support offered once franchisees gain access to the franchisor’s platform of estate agency services, as well as the support of marketing tools and a customer service centre.
Day continued: “Each of our licensees will have unlimited use of the customer service centre and regular ongoing training ‘refreshers’, as well as ongoing support from a tech point of view. That’s not to mention the buying power and economies of scale of being part of a wider group.
“Ultimately, we’re there to support licensee to be successful within their territory.”
From training to marketing, franchise companies offer quite varied programmes in terms of assistance and support services, while it is important to point out that being part of a wider set-up often enables franchisees to benefit from special deals with suppliers.
“With rising costs and the need to be at the forefront of technology and marketing, agents joining a successful brand receive a complete package from day one, which includes substantial discounts and a fully supported model,” said Andy Bushell, franchise director at Hunters.
Hunters work with franchisees to ensure that they are fully trained in the Hunters system and able to compete in all market conditions.
Being part of a national network also benefits each individual trading location, with cross branch referrals and joined up regional marketing.
“With the need to be at the forefront of technology and marketing, agents joining a successful brand receive a complete package from day one, which includes a fully supported model,” Bushell explained.
He continued: “We are able to provide a full estate agency package for our franchise partners. This package includes everything a successful business needs to excel in the UK housing market, including the latest technology, national and regional marketing, including our nationwide TV campaigns, a fully inclusive training academy, dedicated support and significant cost savings.
“We continually support our franchisees from day to day dedicated assistance, annual business reviews, regional meetings and a national conference and awards ceremony.”
As part of the training offered, firms that commit to the franchise model will find that they are able to offer high levels of customer service, which is key to the success of any business, while every member of staff should be equipped with the right tools required to meet customers’ expectations. Some franchises even insist that franchisees participate in annual training to continually sharpen their skills.
Bushell added: “We look for quality independent estate and lettings agents who share our passion to be market leaders and provide the best in customer service.
“For new start ups, we require experienced estate agents with a passion to succeed and produce the highest level of customer service.”
Among the many issues to consider when taking the franchise route to self-employment is the actual cost of using the established brand, business format, and ongoing support, with franchisees usually paying an initial joining fee followed by ongoing fees in the form of either a fixed monthly license fee or a percentage of the profits.
Existing agents switching to a franchise will typically pay significantly less than a new start-up because less support and training is typically needed.
But despite the ongoing royalty fees, some new businesses will find that becoming a franchisee is a lower-cost option than operating an independent business, thanks partly to the proven business format and support offered by the franchise.
Nick Neill, managing director of online estate agent franchise Ewemove, describes a franchise as, quite simply, a “business in a box”.
Neill explained: “If you worked through the numbers to establish your own estate agency business, you'd typically be expecting to run with monthly costs of up to £7,000 after you've paid for property software, access to Rightmove, access to Zoopla, to employ staff to answer the phone, for your website plus added web chat, funded online valuation tools, as well as extra outgoings for out of hours support if you wanted to keep pace with the market and provide 24/7 access.
“But with EweMove, you simply pay a monthly license fee of £1,000 for all of this and more. Plus £250 for each property that you complete (reduced to £100 for a managed Let).”
He added: “The business owners who have transferred their sales and lettings businesses over to the EweMove brand have enjoyed much lower operating costs, leading to higher profits and more time to focus on driving new sales, so a win-win all round.”
By joining EweMove, for example, Neill reports that each franchisee can enjoy an average of 39 high quality leads every month, on top of whatever they develop locally.
He says that these leads convert at 4.5:1 - meaning 45 leads will deliver 10 instructions, 70% of which they tend to complete on, meaning 45 leads would deliver seven completed sales.
“So at an average fee of say £3,000, and given that our franchisees charge typically between 1-1.25%-plus VAT, earnings of £21,000 per month would follow,” he added.
Pros and cons
As with most things in life there are pros and cons to the franchise model. Those that think it is a good idea will talk about how you can buy a ready-made business, benefit from the support the franchise company offers, and trade on an established name.
However, there are benefits to both sides, and so rather than follow a franchise business model, many firms will naturally opt to operate as an independent business as that may be more suited to their personality or the goals that they wish to achieve.
Teresa Brewer, founding director at Finlay Brewer, is among those that has decided against joining a franchise.
She said: “When we started Finlay Brewer, we had a blank canvas to work from and we were able to put our own stamp on the agency. We have grown the business our own way and been able to focus on building strong links within the community and a no-nonsense approach to sales and lettings.
“Being able to work in the community through supporting local charities and neighbourhood groups such as Friends of Brook Green has given us a perspective and trustworthiness that isn’t often afforded to franchised agencies.”
Going it alone will certainly give you full autonomy and control of your business, but there are some very compelling reasons to invest in a franchise rather starting up your business from scratch, especially as a partner may allow you to expand into a more dynamic approach.
If you decide that the franchise route is right for your company, there are a number of issues that you must take into considerations. Make sure that you fully research the individual companies to understand each of the franchising models on offer and establish where the opportunities and pitfalls are. Only then can you understand which one is right for you.
*Marc Da Silva is Estate Agent Today and Letting Agent Today Features Editor. You can follow him on Twitter @propertyjourno