Whether you are just starting out in real estate or are considering a mid-career shift to a new brokerage, one of your biggest decisions will be whether to align yourself with one of the nationally known franchise brokerages or a local or regional independent. There are a variety of considerations to review before you decide.
According to the National Association of Realtors’ (NAR) most recent report, 54 percent of Realtors are affiliated with an independent, non-franchise brokerage. The report identifies this as part of a larger trend in the industry away from the franchise model.
In many markets, we see a trend of buying sprees in which big-box franchise companies purchase independent brokerages to make a dent in desirable markets. This suppresses competition and often forces agents into the position of working for a large franchise, something they were trying to avoid by hanging their license with an indie in the first place.
What are the pros and cons of franchises and indies and how do you know which will be a better fit for you professionally? Let’s break it down.
From the more traditional names like RE/MAX and Coldwell Banker to newer iterations like NextHome and HomeSmart, the value of a franchise brokerage is often considered to lie in its name recognition and in its history of proven success.
Most of the current franchise brokerages grew out of the ’60s and ’70s, a time when easy travel and national communication made it possible for large brands to proliferate and grow. The post-World War II residential boom and the rise of the college-educated baby boomer cohort created a perfect opportunity for brokerage expansion and the crafting of a national message.
- Built-in branding: Franchise companies spend millions each year getting their message and the latest iteration of their brand out there in the form of print and television ads. You can start up without worrying about logos, fonts and other branding elements — they’re already prescribed.
- Established systems and processes: Because they are focused on bringing uniformity to the operations of their brokerages, the big box brands will have systems and processes already in place, ready for you to plug and play. This can be a big asset when you are first starting out, especially if you don’t have preferred systems in mind.
- Support: The corporate structure can offer a sense of safety to agents who are looking for more guidance as they start out. Mentoring programs and training opportunities are often readily available.
- Distance: Because they are grounded in their corporate culture, working for a franchise can mean that the decisions that need to be made locally can take a long time to arrive. In addition, branding elements, policies and processes are based on a reading of the total service area rather than on the particulars of your local market. This can result in a disconnect between what works for you and what works for “most” agents across the country.
- Expense: Exorbitant franchise fees can put your brokers in the position of passing along expenses to the agents rather than investing in their success. When you’re spending so much on fees and commission splits, there’s little left to invest in your own marketing.
- Lack of ownership: Remember that built-in branding? Those built-in systems and processes? They can inhibit your ability to create and promote your own individual brand and to define your own style. That means that if you ever break ties with the franchise mothership, you’ll find yourself back at square one trying to create an identity.
With unique operational models and brands focused on the local market, independent brokerages offer the opportunity to do real estate in a way that is responsive and grounded in the communities agents serve. In addition, an independent brokerage has the ability to define itself and course-correct if needed.
- Nimbleness: Because they are free from a centralized decision-making apparatus, indie brokerages are able to respond as needed to everything from local micro-market shifts to press inquiries. When you are able to adjust branding, marketing and processes without approval from a corporate entity, you add vitality and timeliness to everything you do.
- Unique culture: Culture can vary from location to location, branch to branch depending on the manager, office and support staff, and agents and brokers. Independents can perceive small shifts in operations, personnel and effectiveness and adjust as needed. In addition, they can effectively communicate their unique culture with greater clarity in marketing initiatives and messaging.
- Market share: Indie brokerages own some geographic markets and niches, making them the dominant force in the area. That can be a big advantage for you, providing you with an automatic leg-up with local buyers and sellers.
- Risk: With no “higher power” in charge, independent brokerages have to believe wholeheartedly in their own vision and their own understanding of their market and professional best practices — and so do you. If your broker-owner’s vision is wrong, you could find yourself floundering.
- DIY: From tech to branding to office space, the indie broker has to define, revise and maintain every element of the physical and operational environment. While that can be an advantage for those with a clear vision, it can be chaotic if your broker lacks that sure and steady insight.
- Growth: How can growth be a con? Isn’t growing the brand the dream of every entrepreneur? Well, yes and no. In the case of an independent brokerage, growth is fraught with challenges, including how to maintain a unique culture, consistent service and that responsiveness that indies prize. If your beloved indie brokerage doesn’t manage growth well, you could find yourself frustrated by some of the same problems that plague the big franchises.
It’s no secret that I am a proponent of the nimbleness of the indie brokeragemodel, but everyone has their own preference. As with many things, knowing yourself is the key to knowing which of these models is right for you.