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The difference between a real estate cooperative and franchise

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Though there are attractions to working as an independent real estate agent, it’s not without its challenges. Not only do you have to do the day to day tasks required of any agent, but you also have to do all the behind the scenes work, the dull administration bits and be across every little detail. It means working long hours, having an extreme dedication to your work and accepting you will have little to no family or social life most of the time. So why would you put yourself through all of that when you could be part of a team, with the comprehensive support of a well-known national real estate brand behind you? If you do decide to start, join or buy an estate agency, you will have to decide whether independence, the franchise model, or the cooperative model is best suited to you. There are a number of things to consider when starting a real estate agency, but if you’re considering joining a national real estate brand, you will need to appreciate the differences are between those models.


1.  Real estate franchises

A franchisee will work FOR the agency brand, paying a percentage of sales turnover (and usually property management fees)  to the franchisor – so say goodbye to the fee-free life and freedom of choice you enjoyed as an independent! This means that under the franchise model, your income relies much more heavily on your performance as well as the performance of any systems and/or software you may be required to use. The fee you pay of course provides you with rights to be part of their established and recognised brand as well as to be able to work under that brand, with all the relevant logos and marketing support on offer. There are however limitations on what you can and can’t do under that brand, and your membership of the franchise does come with a certain amount of pressure and market share expectations from the franchisor. This can directly affect your ability to perform, creating a vicious circle that affects your performance results. Because in most cases you are required to sign a lengthy contract, there is reduced pressure on the franchisor to provide you with the specific training and support you need. Franchises are often accused of having an ‘every man/woman for him/her self’ type approach, and there’s rarely any cooperation between franchisees. If your turnover isn’t considered high enough by the franchisor, you may find a competitor placed in your suburb, competing with you under the same brand!

 

2.  Real estate cooperatives

Cooperatives take a more collaborative approach than franchises – being owned by a member base, rather than a single person or entity. The focus tends to be more on the overall community of people that make up the membership – from principals and agents to admin staff and marketing people across all agencies under the brand -  than on the success of an individual agency on its own. Cooperatives work on the theory that working together to build the national brand and support each other as an entire entity means that everyone shares in the success. The key thing about a cooperative however, and First National Real Estate is a great example of this – is the flat fee structure. While franchises are financed through percentage of turnover based fees from their franchisees, cooperatives require each agency to pay a fixed monthly fee to the brand, meaning that as your business grows, you actually pay a lower and lower percentage of your turnover. As a new player, this can be especially useful, keeping budgets on track and allowing for stronger growth opportunities in the early stages of the business’s life. Plus, over time, you have more funds left over to re-invest in your business, its marketing, or your own retirement fund.

 

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3.  Why First National Real Estate?    

There are many real estate brands around the country that all work under a range of different structures. It’s important to do your research before partnering up with a brand as not all brands will offer you the financial incentives you need, or more importantly, the support and training required to effectively represent the brand. This is where First National stands out, with comprehensive training and support programmes that put their people first rather than the network itself. First National members are offered assistance and support every step of the way, even so much as having staff from corporate and/or member offices step in to help other offices get set up, or solve business challenges along the way. Examples include fitting out an office and implementing the branding; to helping them set up technology and software, or guiding them on staff recruitment and training. But beyond that, First National also provides complimentary human resources guidance, which is what every business owner needs, risk management strategies and quality assurance guidelines. It’s this approach that has earned First National a strong and extremely well-respected reputation for its commitment to excellence and care for its members, not to mention Australia’s most satisfied customers, according to Canstar Blue.

 

Fundamentally however, you must decide what’s important for you, when joining a real estate network.  Company culture, brand recognition and reputation, a positive and dynamic business model, excellent technological and HR services, training and support are all crucial components of a successful and happy agency. There’s much more to being part of a brand than just piggy backing off their name and perceived reputation. Real estate cooperatives by their very nature have a much better reputation for consistent and high quality customer service because there is a dynamic team of people all focused on the same goal – the overall success of the community rather than just one person.  

 

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DISCLAIMER
 
The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial or real estate decisions. Click here for full Terms of Use.

 

Tags: network, agents

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