Thinking of Starting a Brokerage? This article is for You! | Milwaukee Real Estate

Independent vs. Franchise:

There is so little written about the differences between franchising your real estate office and being an independent broker. In doing research for this article, I was surprised that Google had literally nothing on the costs and restrictive rules of franchising your real estate business. For all you would-be entrepreneurs out there thinking of starting your own independent real estate brokerage firm, this article should help provide insight for your journey, especially if you are a top producer.

Independent – My Unique Perspective as a Top Producer

Currently, I am headed into my 11^th year as a broker owner of an independent brokerage firm. For the better part of the last 10 years, I have ranked in the top 1% of real estate sales professionals nationally in terms of sold closed business. When deciding to open my brokerage, I never considered a franchise due to the cost. I was leaving behind the agent world of parking my licensee because it was the next logical step when reviewing expenses and costs. In order to accomplish the financial freedom I was seeking, I would need to grow and shed myself of paying hefty commission splits and expenses to someone else. Opening an independent brokerage was a cost saving measure for me as a top producer. It made good fiscal sense for me, and I had most of the leg work done before I began the company. My brand was well recognized in the marketplace, which was a key factor, and we had established trusted vendor relationships over my eight-year agent incubation period which enabled the success of my company, Powers Realty Group.

Being an independent “Indy” broker was a logical step because it gave us the freedom to create unique systems, policies, marketing tools, logo colors, and service offerings. The great advantage of independent firms is that they offer true entrepreneurship with the freedom to lead and create unique business offerings that meet the needs of the local marketplace better than a national franchise. In our case, this was especially true. We could keep it small and were under no pressure to conform to restrictive policies, relentless recruiting quotas, high franchise fees, and marketing constraints that would impede our unique offering in the marketplace. We focused on one-of-a-kind services for our clients and took a very measured, calculated approach to opening an independent brokerage. We started with our policy manual, implemented our stellar management systems, and perfected our mission statement to guide our core values. The difficulty of running a company was made easy by keeping our focus on the clients and sales.

Franchise:

I could be wrong about this, but I think the main reason agents do not start an independent brokerage is because they are fearful, or, they do not have an established brand. If you have an established brand as a team leader or individual agent, you need to weigh carefully the why on wanting to franchise. It may be less expensive, much less expensive, to stay parked with your current broker then venture out in starting a franchise. If cost is the driver to open a company, then please do your research. Franchise models make recruiting a priority. You will need to be constantly recruiting, and if this is not a passion of yours, you may want to rethink the structure of how the franchise real estate system works. They require you to scale!

Your expenses to the franchise may very well exceed your expenses to your current broker. The great thing about starting a franchise is that the playbook for your business is already complete. However, if you are a true entrepreneur and want to build something unique, this option is probably not for you. Franchises have strict rules and guidelines regarding logos, procedures, and policies each franchisee must follow.

The initial fee for a real estate franchise ranges from $10,000 to over $100,000. To put this into perspective, the actual total investment that you would need to put down to open a franchise office is between $150,000-$500,000 after factoring in all the start-up costs. On top of the initial investment, all franchises charge their franchisees an ongoing royalty tax on their office’s production. Usually, this can range from 3-6% of the monthly gross commission income of the office, or a flat fee based on the number of active agents you have.

Lastly, real estate franchise renewal agreements come with renewal fees. These fees are usually half of the initial franchise fee. The renewal fee is something that a franchisee needs to calculate into their long-term financial plans. Typically franchise agreements are 5-20 years, and during each interval you must pay a renewal fee.

Advantages of being small

“Today it is about offering more, so we do. We are very hands on with each and every client experience. Clients are busier than ever, and we make it our business to see beyond the house sale to fulfill the deeper needs of our clients. We are masters at logistics. We specialize in life transitions and enhance the buying and selling process with the high touch emphasis we put on our business. How the client feels through the process is extremely important to our success.”

So, what does a Boutique Broker do and how is it different than other brokers?

I previously worked for Milwaukee’s two largest brokerages before opening Powers Realty Group. Coming from the pharmaceutical industry, I was really surprised about the business models used in real estate. I learned what I could and then decided what I was NOT going to do as I set out on my entrepreneurial journey. Traditional brokerages focus on recruiting agents. Their mission statements, time, money, and effort are all on growing big. My focus, as a boutique broker, is on the consumer. My boutique business model is in exact opposition to every one of my competitors. I am unique in my marketplace, and this makes me a solid choice to interview when you are thinking of selling your home.

Many people are curious about why I did what I did and why I did not franchise the business. For me, it was simple. Follow your core values. There has never been a franchise opportunity that put the customer first. All the franchise opportunities (and there have been dozens that are still coming) are about mergers, acquisition, and recruitment. The customer experience is NEVER spoken of when these brokerages come around. It is about growth and profits. It is just not who we are.

Powers Realty Group, like many other boutique real estate firms across the country, put the customer at the center of our business model. You would be surprised to learn that most residential real estate business models are built on agent recruiting. In the world of Big Brokerage, the customer is actually the real estate agent and not the consumer. This may explain why the customer experience is sacrificed and complaints are growing industry-wide with buyers and sellers reporting consistently of a “bad” buying or selling experience. The focus is not on the service level offered but how many agents can the brokerage recruit on a monthly basis.

I began the boutique experience in 2011 by offering a suite of services to our customers. We started with a simple home staging service model and quickly moved into more sophisticated offerings for our clients. Our Vice President, Gretchen Keating, has a long history of hospitality service. Her service level and my professional sales and managerial experience worked well to create what we have today; a concierge-service led boutique brokerage. We tailor every marketing plan to the customer’s specific home needs, including finding those special houses that may not be on the market yet. We go above and beyond what a normal broker does through our vast hyper-local connections to drive a pleasant, results-orientated experience beyond our competitors. How do we do this? We share. We are a tight knit group of top producers. We are the local experts, and we use our network to our advantage for those we serve.

Our goal is great service, not great volume.