What is a Real Estate Franchise? // How Franchise Brokerages Work // The Real Estate Blitz

What is a Real Estate Franchise? // How Franchise Brokerages Work // The Real Estate Blitz

Morning everybody, what’s going on? KSA Kris here, the Real Estate Blitz, and
today we’re gonna be talking about franchise brokerages. So, I’ve sort of been going over some of the
other ones, “What is a team, what is this and that,” but we haven’t talked about franchises
yet, different types of brokerages. So, what is a franchise? A franchise is basically a broker had his
license, her license, whatever it is, and they’ve decided that they want to pay or buy
in some sort of fashion to a brokerage that’s already been created … Excuse me, a brand
that’s already been created, and they’re paying to actually purchase that franchise. So, the best way of looking at it is, king
of franchises is Ray Kroc, when you talk about McDonald’s. That’s really what McDonald’s and a lot of
other places go to, if you look at a lot of these big brands that are stretching out across
the nation, in one form or fashion, they’re a franchise. That’s your Starbucks, McDonald’s is a franchise,
Burger King is a franchise, Jersey Mike’s subs, tons of franchises that are out there. Real estate is no different; somebody says
“I came up with this secret recipe,” just like the Colonel over at KFC, Kentucky Fried
Chicken, right? They say “I have the magic recipe, and I will
give you the magic recipe, but you have to do it our way, this is how we do it; and in
return for using our brand, our processes, our procedures and our secret recipe, you’re
going to pay us a certain amount of money.” So, different franchises are out there, and
there’s a ton. There’s a ton of franchises, but I’ll just
give some of the big ones; you’ve got RE/MAX, RE/MAX is a big franchise, you have Keller
Williams, it’s a big franchise, you have Coldwell Banker, big franchise, Century 21, and the
list goes on and on. Lot of franchises. Franchises come in many different forms, fashions,
and sizes; some are small, some are extremely big, some have different “secret recipes,”
so whether it’s a flat-fee franchise, whether it’s a hybrid franchise, just a for-profit
franchise, all of them are for profit but I think there’s a difference. What I mean by that is … Great example:
Keller Williams is a very good franchise, a lot of people buy into Keller Williams,
and maybe what I should talk about first is why people think a franchise works, then I’ll
go back to what I was just saying a second ago. So, a lot of people deeply believe – and this
is true, it has been true for a long time, I think it’s changing – they believe “If I
have this brand,” you hear agents say it all the time … “If I was with Coldwell Banker,
then people will see I’m with Coldwell Banker and they’ll want to work with me, because
I believe people work with Coldwell Banker agents.” A lot of brokers feel the same way: they don’t
know or don’t want to figure out how to take their small boutique to become a bigger entity
in the marketplace, or how to stretch out nationwide, and they don’t want to come up
with processes, procedures or systems, so they just buy into a process/procedure/system
franchise. A lot of buyers do feel that way (older buyers,
from what I’m learning). I do a lot of surveys and ask a lot of people
their opinions, and what I’ve found is … My mother-in-law is a great example, I asked
her “How did you choose who sold your house last time?” She says “Well, I know RE/MAX has always,
they’re a good business.” Now, what we know as real estate agents is
that’s not always true. It’s not that RE/MAX is a bad business, but
it comes down to the individual real estate agent; even though RE/MAX is a great system,
the individual real estate agent decides if it’s good or bad (the experience that’s been
had by the person who’s buying or selling a home). It’s the individual agent. Where I see some of the shortfalls is that
the different brokerages are not training the individual agents, but we’ll get into
that. So, you have different types of franchises
even; like I said, big or small, some are flat-fees, some are hybrid, some are just
trying to make as much money as possible … But typically how it works is that you’re going
to get some type of franchise fee, so if you’re an agent and you’re trying to join a franchise
(not all franchises, and I’ll talk about that), most of the time, every time you get a commission
check, you’re going to cut a portion to the franchise. It could be 2%, it could be 6%, I’ve seen
it all the way up to 8%. So, 8% or 6% of your profit is gonna go to
the franchise, then your broker is going to get their cut. Now, it’s a little bit different in more of
a hybrid states, or like Keller Williams, where they’re saying there’s a fee per transaction
all the way up to a certain amount of money and then we’re gonna cap you, and then after
that, 100% of the profit is gonna be your profit. It’s a little bit different. So, benefits of being with a franchise, typically
… Not always, I want to be clear on that. You need to do your research, if you’re looking
at a franchise as a real estate agent and you’re thinking joining a franchise will help
you or your business (and most young agents believe that), I personally don’t believe
that. However, it doesn’t matter what I believe,
it matters what you believe and what your decision is going to be, because every market
is gonna be different. The market where I’m at, we’ve created – and
it took time, it took money – we created our own brand and our own momentum so we don’t
need a franchise in order to get business or to create business. But for young new agents, sometimes they feel
like they have to be part of something like that. So, most franchises are gonna provide you
training, not all franchises. You need to ask, if training is important
to you and you feel like you don’t know enough about this business, you need to ask “What
kind of training do you provide?” And don’t just take their cookie-cutter answer;
for example, Keller Williams says “We do training,” … I think it’s like five days a week, the
entire month. So you’re talking about 5/10/15/20 days of
training every month. If you just took that on the surface, you’d
be like “Wow, that’s amazing, I can always get training,” but you should ask questions,
like “What kind of training? What’s the evolution of the training, is it
repeat training every month?” You should be asking these questions, because
you don’t want to get to a point where you tied your boat to somebody to get training
(not talking bad about Keller Williams, I’m just saying in general, ask questions), and
you’re capped at how much knowledge you can actually get if that was what was important
to you for joining that organization. Or, “After a certain amount of training, do
you start charging me?” Which a lot of places do. You’ve got to keep in mind, most franchises
are always trying to find a way to stick their hands in your pockets. It just is what it is, they’re gonna charge
you for (not always), they could charge you for training, you’re looking at inflated E&O,
you’re looking at the franchise fees, looking at … “If you want to do direct mail, use
our direct mail, we provide this and that,” and then it’s extremely expensive. I’m not saying that these things are bad at
all, I’m just saying, be aware that that is the truth. So, most franchises will provide training,
most will provide some type of mentorship program or something along those lines. Now, you’ll have to pay for it. What I’ve seen in a lot of franchises is they’ll
say “This person will mentor you and help you produce, and then off of your first three
deals (or however many it is), that person is gonna take a portion of your profit.” I think that’s good and bad sometimes, same
thing: ask questions. “Great, so you have a mentorship program. What is that person going to teach me?” … “Well, you know, they’re gonna teach you
[unclear].” … “Great, do you have it written down? What are they going to teach me?” The reason why I say that is because I’ve
seen a lot of people come through our doors and they’ve been on these mentorship programs
where we’ve had to go back and renegotiate with the broker, and say “Look, the mentor
literally told them to just go knock on some doors and has given them zero mentorship,
yet you want to take money from them over the next three deals when this person worked
with them for like maybe two hours and didn’t provide any value, or did not help them actually
produce any profit.” You’ve got to ask these questions. They could usually provide direct mail templates,
they’re gonna provide some of the marketing – which is a big one, I know the Coldwell
Banker up the street from us provide a ton of marketing value, a lot of value ad – now,
not all Coldwell Bankers do that, but I know the one that’s up the street does, and they
do a pretty great job at it, I’ve got to say. They’re going to provide you the brand, gonna
help you out with some of the design work, usually the brokers are pretty well put-together
and they can assist you as well, and you’re kind of tied into an organization that usually
feels like a pretty good team, so you have a little bit of a support system there. So, my overall view of franchises: I think
franchises are good, I definitely can’t say anything extremely negative about them, but
depending … Like I’ve said in other ones when I talked about flat-fee brokerages or
anything like that, haven’t talked about boutiques yet but I will, it comes down to “What do
you want, what are you trying to accomplish?” If you’ve already established a brand and
you’re already a seasoned agent, and you already have a booked business, a franchise may not
be for you. You may think it is, for the simple fact that
“Well you know, if I have this brand, maybe it’ll get me more business.” It might, but you’ve really got to take that
into consideration. Maybe a flat-fee is best for you so you have
more money, so you can market for yourself. If you’re a new agent and you don’t have much
of anything and you really want more direction, a franchise might work extremely well for
you (at least to start, and then if you grow and change) … Some people are even, when
I come to franchises, let’s say you want to build a team; some franchises are actually
getting it, most franchises don’t, and the reason why is they just don’t get it. They don’t understand the team concept and
they aren’t very supportive of it, because they feel like it’s taking business from the
broker but it’s the complete opposite, absolutely not true. I would say, if you’re looking to build a
team or you have a team, Keller Williams (and you want to join a franchise), Keller Williams
has a pretty fantastic model that not only will help you build your team and create a
mega-team, but will help you expand nationwide through other Keller Williams offices. Coldwell Banker is on a big hustle right now,
they’re buying out a lot of teams; they make offers to producing teams, they made an offer
to us, I know three friends of mine that had teams received money from Coldwell Banker,
along with some benefits to join Coldwell Banker instead of being on their own or at
a flat-fee brokerage. We chose not to do that, just because we have
different plans. But Coldwell Banker is building a team model,
so if you’re looking to build a team or you have a team and you want to be part of a franchise,
in my opinion those are the two best right now. None of the other franchises really get it,
they don’t support it, and they don’t adjust in order to keep the team model profitable
for the team and also for the brokerage (my opinion). With that said, that’s a quick overview on
franchise brokerages, and if you have any questions I am always open. You can drop something in the comments down
below, I’ll always reply back to you. You can give me a call on my cell phone, you
could send me an email, whatever it is. If you don’t have my number or want my email,
you can just hit me up on the post down below, and I’ll send it to you. That said, do me a favor: like/share/comment,
hit me up on YouTube, hit me up on Facebook, and pretty soon we’re gonna have the website
up. We’re also gonna have the podcast up, which
is gonna be kind of cool, because on the podcast I’m gonna be strictly interviewing people
that are either producing … I’m gonna be interviewing entrepreneurs, and I’m gonna
be basically – but not the same crap that you keep hearing, if you haven’t watched enough
of the Blitz then you may not know what this is all about; this is kind of like the stuff
that our … The truths of this business, and that’s really what I want to make sure
that, as I’m interviewing people, we put on there. And some people that aren’t even in the real
estate industry that can give great perspective on growth, because I’m a deep believer that
when it comes to building a business, whatever it is that you’re selling (because we’re all
in sales), that is the commodity, but all entrepreneurs kind of go through some of the
same struggles. So I’ll be bringing on some people that are
extremely wealthy, that have built some extremely big brands, that are extremely recognized,
so that’ll help you with building your business. Do me a favor: like/share/comment. If you have any questions, hit me up, and
if you have any episodes or things that you want me to talk about or bring in somebody,
let me know, man. I’d love to find out what you want to hear
about. Thanks again, KSA Kris, Real Estate Blitz,
and we’ll see you tomorrow.

2 thoughts on “What is a Real Estate Franchise? // How Franchise Brokerages Work // The Real Estate Blitz

  1. What is the up front cost to have a franchise of coldwater. Thanks

  2. Thanks for the info very helpful. Can you provide some detail specifics of what Franchise percentages are for sales associates. Say for Caldwell 70/30 or 80/20? Monthly fees mandatory? Or as you talked about for KW a transaction fee up to an amount then 100% Do they have a monthly fee or a desk fee?

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