Brokerage

To franchise or not to franchise: That is the question

Freedom of independence can fuel success, but so can a brand -- as long as the operator's good

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Takeaways:

  • Franchising’s not for every firm, but brokerages should run the numbers and check their long-term goals before deciding.
  • The quality of a firm’s management team is the ultimate determinator of success, not whether a brokerage is franchised or not.
  • Successful firms need cutting-edge systems and technology, whether they build themselves or get through a franchisor.

SAN FRANCISCO — Mauricio Umansky wanted to break the real estate mold, so four years ago he founded the independent Los Angeles brokerage The Agency. It’s been a raving success.

“Names carry a legacy,” and that’s what Umansky wanted to break with his startup brokerage, which did over $3 billion in sales in the last two years. Umansky, inspired by the connection to the community he felt running an independent firm gave him, was firm in his decision.

It helps that his firm has built out its own systems and tech, he added.

Mauricio Umansky

Mauricio Umansky

Sitting to Umansky’s left on a panel at Inman Connect San Francisco, Realogy Franchise Group (RFG) President and CEO Alex Perriello agreed, and disagreed. RFG runs the large brands Coldwell Banker Real Estate, Century 21 Real Estate and Better Homes and Gardens Real Estate.

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“Franchising’s not for everyone,” Perriello said. But firms will never know unless they take a cold-eyed look at the option.

In some cases, the technology and systems a franchisor provides more than pays for the franchise fees a broker has to cough up, he said. In others, the growth and scale that a brand blows in a brokerage’s sails is worth giving up the single life.

Dottie Herman

Dottie Herman

The two other brokerage leaders on the panel — Dottie Herman, president and CEO of large New York City-based brokerage Douglas Elliman Real Estate, and Bob Moles, chairman of Intero Real Estate Services, a large Silicon Valley-based firm — exemplified this back-and-forth.

Herman bought Douglas Elliman — now one of the largest firms in the U.S. — over a decade ago when it was affiliated with Prudential Real Estate. The affiliation, in the early days, was a godsend.

“They believed in me,” Elliman said. The network lent her the money to expand into Long Island, New York and into Manhattan, where she is now a real estate queen.

With its geographic restrictions for member firms, the affiliation ended up stifling growth, she added. Douglas Elliman went independent in 2012.

But franchised or not, Herman said a firm’s only as good as its operator.

Moles, a former Realogy exec, backed her assertion.

A firm or brand’s story is key to winning business and agents, but it’s not the message that closes deals — it’s the messenger, he said.

Moles sees both sides of the fence as the CEO of Intero, which is independent but also has its own franchise network.

Email Paul Hagey.