Unlocking Franchise Economics
April 1, 2009 by e-Partner · Leave a Comment
What is the criteria for analyzing the impact of a franchise relationship on a Broker/Owner’s company? How is the franchise commitment qualified and its return quantified?
How does a Broker/Owner determin the ongoing economic value of a franchise to his/her business? What tangible and measurable market contributions should a franchisor deliver to a Broker/Owner?
Whether you are a franchisee currently or are considering investing in a franchise, please review the following e-Partner Podcast.
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Unlocking Franchise Economics – Part 3
March 26, 2009 by e-Partner · Leave a Comment
Syndicated from REALonomics
Have we ever wondered how the consumer views our real estate industry franchises? If we are going to unlock franchise economics and truly understand the value propositions inherent in franchising we must also see them (franchises) as the consumer sees them and we must ONLY value them as does the consumer.
If you were to create a list of distinctions…real ones…dynamic ones…that separate one franchise brand from another in the eyes of the only true client, the consumer, what would those distinctions be and how are they manifest in the process of transacting business?
Enjoy the PhotoBlog below. Read it carefully and ask yourself what might happen if the consumer could place all franchises into one blender and extract the best. What would the “best” be? What are the clear distinctions between franchise A, B and C?
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Unlocking Franchise Economics – Part 2
March 26, 2009 by e-Partner · Leave a Comment
Syndicated from REALonomics
In the post Unlocking Franchise Economics – Part 1,we opened the door to asking relevant questions that will help owners analyze the economics of real estate franchising.
In this series of posts e-Partner has one primary objective it would like to accomplish on behalf of owners and that is as follows:
…to help owners unlock the door to franchise economics so that gain an understanding of the substantive value propositions that exist and how a franchise name and associated promises can be quantifed in real dollars that are converted to a profit equation that is greater than it would be if the brokerage firm operated without the franchise.
Franchising is an Add-On Toolkit, with Limitations
At its most fundamental economic level a real estate franchise is a brokerage toolkit. Yes, there are all sorts of issues such as marketing, relocation, referrals, training, conventions, etc. But for now, we are setting those aside. A real estate franchise is an economic toolkit, at least it should be.
Franchisors spend a great deal of time butter-balling brands, numbers of offices, growth, name recognition, relocation, referrals, etc., and that is how most franchise sales people will present their proposition to an owner. It’s the owner’s responsibility to translate the presentation into real economic reality and performance and to insist that the franchisor do the same.
As a toolkit, there are some things a franchise can do, there are many things it cannot do and there are more things it does not want to do for a brokerage firm because to do them will harm the franchisor’s bottom line.
Let me be clear on this last point. At some point in the franchise relationship, an owner may find the franchisor a competitor for market territory, referrals, relocation and even local business.
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Factor 4 – Traditional Models
March 24, 2009 by e-Partner · Leave a Comment
Throughout the 60’s, 70’s and 80’s the modern real estate franchise machine emerged creating a new service and marketing partner for traditional brokerage companies throughout the United States.
Century 21, ERA, Coldwell Banker, Realty World and in the late 80’s and early 90’s Prudential entered the crowded field fueled by their acquisition of Merrill Lynch’s brokerage houses.
The early franchisors flourished as they attracted brokerage firms to their franchise promises associated with brand recognition, marketing tools, advertisement, national relocation, referrals, training and business support services. In exchange for their franchise services they were paid handsomely, usually extracting a fee of 6-8% fee from all gross brokerage receipts.
Inherent within the franchisor’s model is the concept of territorialism, the promise or illusion of exclusive access market presence, tools, economies of scale and owner support that come from association with a large national entity.
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Unlocking Franchise Economics – Part 1
Syndicated from REALonomics
Although relatively new, franchising has a powerful presence in the historical flow of the real estate industry and has shaped many outcomes and market realities since its inception.
Some broker/owners would claim that a franchise has made them incredibly successful, while others would say they have failed miserably with respect to leveraging a franchisor’s brand and its prima fascia value propositions.
However, despite the predominance of real estate franchising a large number of real estate brokerages still prefer their independent status and some of these have become their own franchised brands, capitalizing on the economic dividends available to them through leveraging themselves.
Although franchising is a powerful force within the industry, REALonomics believes there is still too little careful analysis and quantification of franchising’s market and economic value on the part of owners.
Quantifying a Franchise Value Remains Elusive
In addition, the ability to create economic performance models for a franchise, judge its market impact on a forward moving basis (trending), fully understand the costs and benefits to owners, agents and most importantly, to understand with as much certainty as possible the way in which consumers view franchises, remains quite elusive.
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