Real estate brokerage Realty One Group Inc. has entered the franchising business with Temecula, Calif.-based broker Barbara Baker affiliating with the company as Realty One Group Southwest.
Currently, Realty One Group Southwest has between 15 and 20 agents, and expects to grow to between 50 and 75 by year’s end, Baker said.
Based in Las Vegas, Realty One Group operates 15 brokerage offices with more than 4,000 agents in Arizona, Nevada and Southern California.
In August, CEO Kuba Jewgieniew announced that the company would develop a franchise system as the next step in the company’s plans to expand nationwide and become a publicly traded company.
With Baker on board, Realty One Group’s new franchising arm, Irvine, Calif.-based Realty One Group Affiliates Inc., now has its first franchisee.
Jewgieniew said Realty One Group Affiliates plans to add at least 100 franchise offices throughout the country, including in the 50 largest metros, in the next couple of years. Realty One Group’s goal is to go public in 2013, he said.
Jewgieniew expects to compete with some of the more established franchise companies because of Realty One Group’s "unconventional" franchise structure.
For example, the company charges very low upfront fees — just $1 — to begin the franchise relationship, which helps franchisees establish a solid foundation from the beginning, Jewgieniew said. The total outlay to become a fully established franchisee ranges from $28,251 to $195,001, according to the company’s website.
Another thing that differentiates Realty One Group’s franchise operation from others, Jewgieniew said, is its fee structure. Agents are not charged transaction fees that scale with the size of transaction amounts, he said, and there are no annual royalty fees.
Instead of paying royalties or annual fees, Jewgieniew said, all agents pay a flat monthly fee of $100. Of that, $75 goes to the franchisee, and $25 to Realty One Group. There’s also a flat fee of $200 for each transaction, $150 of which goes to the franchisee, and $50 to Realty One Group. Realty One Group also collects $50 for each $500,000 of a transaction.
"We have skin in the game," Jewgieniew said of the franchise system’s business model. "Our income is all about agent count and unit-closed transaction volume," he said.
Baker said she decided to affiliate with Realty One Group because of its different model.
"(Realty One Group) made the affordability upfront as easy as possible," Baker said.
Baker also liked that the system allows agents to keep more of their commissions while having access to an office and other perks that come with a full-service real estate office.
Baker says she expects different franchise branches to differ slightly according to the market they find themselves in. At her franchise office, agents will pay a fee of 0.175 percent of the total sale price for each transaction, she said.
Realty One Group has grown at a rapid pace since its inception in 2005. Between 2007 and 2011, the firm saw the greatest increase (12,475) in the number of transaction sides — instances in which the company’s agents represented buyers, sellers or both on transactions — of any brokerage in the country in that time period, according to Real Trends Inc.
In 2011, the firm was the 11th-largest brokerage in the nation in terms of transaction side volume (15,475), according to Real Trends. Jewgieniew expects that ranking to jump to No. 7 this year, he said.
In August, Realty One Group tapped Realogy Corp. vet Rick Hudson to guide the franchise wing of the company. Hudson had previously served as a manager for the real estate giant’s franchise group, whose brands include Century 21 Real Estate, Coldwell Banker Real Estate, ERA Real Estate, and Better Homes and Gardens Real Estate, among others.
Realty One Group also announced that it recently hired three regional vice presidents to drive the franchise system’s initial push in the U.S. west of the Mississippi River.
John Garry, who worked with Realogy’s franchise brands ERA Real Estate and Better Homes and Gardens Real Estate, will oversee Southern California, Arizona and New Mexico.
Real estate transaction and software veteran Luis Vega will oversee Northern California, Oregon, Washington, Idaho and Nevada.
Mark Lieberman, formerly a regional vice president at Realogy, will manage Utah, Colorado, Montana, Wyoming, North Dakota, South Dakota, Nebraska, Kansas and Texas.