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Franchising in Real Estate/Property in Ireland

Franchisors usually levy an initial franchise fee, followed by monthly royalty and advertising fees. There are a few different options on the initial franchise fee that can be explored. There are also monthly royalty payments based on gross revenue which cover national advertising and marketing for the brand and other fees may be levied for the licence to the technology provided, and ongoing training. This pooling of resources allows franchisees access to business systems that are ordinarily the province of much larger organizations.

Most estate agency organizations require franchisees to contribute to regional or national advertising funds, and also to spend money promoting the brand locally. The benefits of cooperative advertising in franchise systems arise both from the increase in number of advertisements that multiple contributors can buy, and also from professional advertising agencies, market research, public relations, and other support.

The franchisee is an independent operator owning his own business. Franchisees operate their own businesses, are entitled to all profits that are generated, are responsible for paying their own taxes and their own employees. In Ireland, the majority of estate agency franchisees are conversions of existing businesses rather than new start-ups, (however this is changing in favour of start-ups). This form of franchise occurs when the owner of an operating estate agency office decides to affiliate or franchise to a franchise chain to take advantage of the brand and certain components of the operating system. This is a different type of franchise relationship than is typically seen in the fast-food industry, where the business owners do not need to know anything about running a restaurant in order to operate the franchise. In affiliation franchising to date in Ireland, the franchisee is allowed to continue using a pre-existing trade name along with the franchisors brand name. Conversion franchising or affiliation franchising is the most commonly used in estate agency. The franchisor seeks active owner operators, believing that value is added to a franchise business by having the motivation and entrepreneurial efforts of owner operators. The development of ecommerce and the internet has resulted in the potential increase in franchising. Through the internet and intra nets, franchising companies are able to communicate faster and better with franchisees, suppliers, and consumers.

If you own an estate agency, is franchising right for you?

That depends. Franchising is a business strategy in which the parties share many interests, but not all. Both parties depend on the efforts of the other for their own success, but don’t necessarily succeed just because their partner does. Franchising only thrives when both franchisor and franchisees achieve their objectives. Although it shares some attributes with a partnership, franchising is not a true “partnership”. However, there are many benefits of franchising. For example, business owners do not have to maintain a brand name or consider the best way to operate their business. These elements are provided by the franchisor, which in turn allows franchisees to concentrate on expanding their business The reputation that the brand conveys is immediately available to the new franchisees.

Franchising is a business relationship, and each relationship is personal. No two people who are approached will find the same advantages or disadvantages of franchising. Many factors will influence whether a franchise relationship is good, just as many factors influence whether any other personal or business relationship is good. And, as in any relationship, the benefits to the parties to a franchise relationship must, over the long term, must out weigh any disadvantages, if the relationship is to endure.

After the franchise agreements have been signed, most estate agency franchisors will help franchisees to develop or revise business plans. Training and orientation of the franchisors business systems will be delivered within the first few months to the manager/owner of the franchisee company and in cooperation with the manager/owner, training will be delivered to the sales agents and administrative staff.

One of the most valuable forms of business consultation available to an estate agency franchisee arises from the relationship one franchisee develops with other franchisees within the network. Whether they meet locally, regionally nationally or internationally, franchisees in the same system develop a kinship and collegiality arising from the way they address similar problems. Most franchise organizations have formal and informal franchisee networks, within which franchisees are typically willing to share their experiences with their colleagues.

Most estate agents in Ireland are so focused on day-to-day operations that they have very little time to devote to research and development. Franchisors often become aware of market trends and other developments if for no other reason than they operate in differing markets around the country or around the world and because they are active in industry associations. Estate agency franchisors are usually leaders in their industries and employ professional staff whose job description includes finding ways to do things better. They naturally attract consultants and others with new products and business ideas. This knowledge is generally freely passed onto franchisees and often works its way into the business strategies of the franchise network. On the reverse side, many franchisees typically come up with new ideas on ways of doing business, which they also share with their colleagues and the franchisor. In fact, most franchise agreements require this sharing of ideas and information. Most franchise organizations test new ideas for products with franchisees before “rolling them out” through the rest of the franchise organization. This approach to innovation can typically avoid mistakes, although it does not dictate that every innovation or marketing plan will be successful. However, surely one of the most important benefits is the business resale opportunity also called the “exit strategy”. At some point, the owner of every business wants to sell on or otherwise transfer ownership of his or her business. The business which has an established reputation and brand name often is attractive for purchasers by the franchisor, existing franchisees, as well as by prospective franchisees. Because franchisors are regularly engaged in recruiting new franchisees, they also may be able to identify someone who would rather invest in an existing business rather than a new franchise business. Sometimes the franchisor in considering an initial public offering of its stock may want to acquire a successful franchisees business to make it a part of a public offer. This along with the fact that franchisees have contracts that provide support, access to business systems and a recognized brand name may enable franchisees to participate in and be paid a higher multiple of earnings than might be paid if the business was sold other than as a part of a publicly traded company. There is likely to be a higher demand for a business that operates as a franchisee of a successful franchising company than there is for a small business which has a single location and which is perceived to be successful primarily because of the reputation and skills of the individual business owner.

Franchising in estate agency is growing rapidly. In Ireland of the 1200 estate agencies around 470 are in franchise or quasi franchise groupings. Although only over 1/3 of the offices, these groups have over 2/3 of the market share.

So if you are considering expanding your estate agency business or setting up, then you should consider franchising.