Realogy, the largest real estate franchise company in the United States, has added another real estate franchise brand to its already formidable list, today announcing a 50-year licensing agreement with a publishing company to use the Better Homes and Gardens real estate brand.

Financial terms of the deal with Meredith Corp. — a publishing company that owns about 25 subscription magazines, including Better Homes and Gardens, Ladies’ Home Journal

Realogy, the largest real estate franchise company in the United States, has added another real estate franchise brand to its already formidable list, today announcing a 50-year licensing agreement with a publishing company to use the Better Homes and Gardens real estate brand.

Financial terms of the deal with Meredith Corp. — a publishing company that owns about 25 subscription magazines, including Better Homes and Gardens, Ladies’ Home Journal, Family Circle and Parents — were not disclosed. Meredith publishes about 200 special-interest publications under about 80 titles, has about 400 books in print, and owns 13 television stations, 40 Web sites and operates the Better.tv and Parents.tv broadband sites.

Meredith had operated its own real estate franchise network under the Better Homes and Gardens brand from 1978-98, when it sold that business to GMAC.

Existing Realogy company-owned and franchise brands include Century 21, Coldwell Banker, ERA and Sotheby’s International Realty. Realogy was formed in 2006 as a spin-off of real estate and travel services giant Cendant Corp. and was acquired this year by an affiliate of private equity firm Apollo Management LP in a deal valued at about $8.5 billion.

While a real estate market slowdown had prompted cost-cutting moves by Realogy in the past year, including some office closures and a workforce reduction within its company-owned operations, Realogy Franchise Group President and CEO Alex Perriello said the company is looking toward the future with the licensing deal.

"We are not trying to time this with a market cycle," Perriello told Inman News. "It’s really a long-term decision. This is about what Realogy would look like 10 years from now. We think this is a highly strategic decision on our part. We think it speaks volumes for what we feel the long-term prospects are for the real estate industry."

Realogy and its Cendant predecessor have typically bought up existing real estate franchise networks, though under the Better Homes and Gardens deal Realogy plans to build a new network around an established brand.

The agreement is reminiscent of Cendant’s launch of a Sotheby’s franchise network through a 50-year licensing deal, announced in 2004.

Under that deal, worth about $100 million, Cendant acquired some company-owned Sotheby’s brokerage offices. The company signed up some of the existing offices that had maintained a loose marketing affiliation with the Sotheby’s brand into the newly created franchise network while seeking out other companies to join the network. That network now has about 8,000 sales associates and 400 offices in the U.S. and dozens of other nations.

Perriello said that while the Better Homes and Gardens Real Estate network "is primarily a franchise model … we may at some point operate company-owned operations. We have no immediate plans to do that. It’s certainly an option we would have."

The initial plan is to seek out unaffiliated companies in the United States to join the Better Homes and Gardens franchise network, Perriello said, and the company will also take a look at options for existing franchisees to do business under the Better Homes and Gardens brand.

There is a 98 percent renewal rate among Realogy’s existing franchise networks, and Perriello said some franchisees choose to operate under multiple franchise brands.

While Perriello said he believes there are "substantial domestic opportunities" to grow the Better Homes and Gardens real estate franchise network, "we’re also very successful as a global franchisor of real estate companies, so that will be attractive to us as well."

On July 1, 1998, Meredith sold the net assets of Better Homes and Gardens Real Estate Service, its franchise real estate brokerage business, to GMAC, and in a separate transaction entered into a licensing agreement that authorized GMAC Home Services to use the company’s trademark for a 10-year period, with no option to renew this agreement." This allows GMAC Home Services a reasonable time to transition the business to its own brand," according to a 1999 earnings report by Meredith.

Meredith had also reported that its Better Homes and Gardens Real Estate Service had 806 member firms in the United States and 24 internationally as of June 30, 1998.

GMAC Real Estate has an estimated 1,300 franchise and company-owned real estate offices and 22,000 sales associates in the United States and Canada.

The Better Homes and Gardens name is already established, Perriello said, which was a key draw for Realogy. "The Better Homes and Gardens brand is very, very well known to consumers. It also enjoys a pretty good recognition and history in the real estate community, so we don’t have to build recognition for the name — the name is already there."

Perriello said he envisions broad appeal rather than a niche focus for the Better Homes and Gardens brand. He said he expects the franchise network will catch on with mid-size to large real estate companies.

As a part of the deal, Meredith will receive royalty payments from Realogy based on a percentage of sales through the Better Homes and Gardens Real Estate franchise system, and Realogy also has agreed to purchase advertising in Meredith titles and market magazine subscriptions through its franchise system while Meredith "plans to leverage the relationship to create additional advertising partnerships with existing and new clients and will offer Realogy selected database services."

In a statement, Meredith Chief Development Officer John S. Zieser said, "Better Homes and Gardens is a powerful brand, and we are actively seeking more licensing opportunities that fit our strategic objective of leveraging Meredith’s brands and our 85-million name database on behalf of market-leading companies such as Realogy."

Patrick Taylor, a Meredith spokesman, said that home buyers are a core audience for several of the company’s major titles. "When people are in that stage of family formation — moving to a new home or buying a first home — that’s the time where we’ll find them acclimated to Meredith titles," he said. The Better Homes and Gardens magazine alone has a circulation of 7.6 million and an estimated readership of about 40 million, Meredith reported.

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