Operating partners will no longer be required to own a stake in their market center, and the company is removing noncompete language for third-party vendors.

Keller Williams announced last week major changes to its franchise agreements, Inman has learned.

Moving forward, operating partners will no longer be required to own a 20 percent stake in company market centers. The company is also removing non-compete language that will allow market centers to go outside Keller Williams for ancillary services if they so choose.

“Our conversations with KW franchisee leaders, expressed in emails last week, fully encompasses our reasoning around the latest changes we’ve made to our license agreements,” Darryl Frost, a spokesperson for Keller Williams told Inman, confirming the changes. “You’re seeing the results of a great conversation with our franchisee leaders.”

Removal of ownership requirements

It’s been a longstanding requirement for operating principals to maintain, at minimum, a 20 percent ownership stake in their market center. Keller Williams is now going to officially remove that requirement, allowing more flexibility in leaderships roles at individual market centers.

“This standard was maintained with the objective of ensuring that an operating principal, that individual with the primary responsibility for maximizing the profit potential of the market center, has a clear and substantial financial incentive to see the market center succeed,” Keller Williams’ executive team said in an internal memo. “After considerable feedback from the field, we have determined that the beneficial impact of this standard is outweighed by the licensee’s need to have more flexibility in establishing performance goals and managing its leadership opportunities.”

Operating partners are not prohibited from having an ownership take in the market center, but it is no longer required. Keller Williams still expects that the role of the operating partner will require substantial control, to ensure the market center will compete at a high level.

A former Keller Williams market center owner told Inman they believe the change is the result of Keller Williams recognizing that operating partner is more of a job than a business opportunity.

Removal of noncompete language

With the rise of third-party vendors and services on everything from coaching and training to mortgage, title and insurance, Keller Williams is opening up its market centers to create their own, or associate with outside businesses.

“We recognize that many of our market centers and agents have already developed relationships with other, third-party providers, and we respect those relationships,” the company said in the memo.

Keller Williams has always aimed to provide products and services for the entire transaction, be it Keller Mortgage or its training programs, KW Maps and Bold. The company has even committed to investing, it says, up to $1 billion in technology development for its end-to-end platform. Now, however, the company want its products to stand on value alone.

“We fundamentally believe that the ancillary products [Keller Williams Realty International] and its affiliates offer must compete on their value alone, and if they don’t, you and your agents should be able to find and retain the best partner products for your businesses,” the company said.

Some Keller Williams training courses will still be required, in order to fulfill educational requirements under the company’s license agreement.

The move comes at a time when more and more Keller Williams associates are looking at business opportunities outside of real estate, whether it’s starting their own iBuyer-type platform, or different technology startups.

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