Want to Start a Business in Real Estate but Can’t Make up Your Mind How?
If you are considering starting a business in real estate, the first question you should ask yourself is: do I want to do this alone or would I rather join an established company as a franchisee?
The answer to that question will determine whether you should go independent and open your own real estate broker enterprise, or if franchising is the better route.
In this article, we explain the pros and cons of starting an independent brokerage vs. buying a franchise brokerage.
Pros and cons of a real estate franchise
There are many advantages provided by franchise brokers, but there are disadvantages too. Whether the disadvantages outweigh the advantages depends on individual circumstances and characteristics.
The pros
When you operate a franchise, you benefit from people’s perception of the brand – a business that can be trusted because they have built their reputation over many years.
For example, the franchisor provides all the necessary marketing materials, including brochures, website content, and marketing tools.
Franchisees are given access to training, development, and coaching from professionals who have been trained by the franchisers. This may include the franchisors themselves, or senior people within the company.
A strong and supportive network that can help you to grow your business, improve your skills, and build a high-performing team. This can also act as a referral network.
The strength of national franchises is being a recognized brand in the industry. As well as the customer benefits of brand recognition of a franchised company, this will help attract high performers to your business – the agents and brokers who will help you be successful.
The cons
Buying a real estate franchise can be expensive. You’ll have the initial fee, the costs of premises and equipment, and ongoing franchise fees to pay (monthly fees and royalties).
While you may benefit from the training provided by the franchisor, the training may be basic. If this is the case, you may find yourself wishing to invest in external training, at your own expense.
As a franchisee, you are limited to how you run your business by the terms of the franchise contract. The franchisor is operating a large business, and their way of working must be replicated across all franchisees.
Pros and cons of independent brokers
As an independent broker, you can be more flexible with your business, but you will lose the support of a national brand. Here we outline the main pros and cons of starting your own independent real estate brokerage.
The pros
One of the biggest benefits of being an independent brokerage is that you are not limited by a franchisor’s guidelines. You can build your business according to your own vision and values.
As an independent broker, you have complete freedom and flexibility to work from your home or anywhere else you want. You can set your own hours and priorities, and make decisions without referring to the franchisor.
You may have lower startup costs, with a greater ability to choose where to locate. You won’t need to pay an initial franchise fee, and there are no ongoing charges and commissions to pay to the franchisor.
A national real estate brokerage will naturally have a national focus, but the real estate market is very localized. As an independent, you can focus on your local market, and adjust strategy and marketing accordingly.
The Cons
As an independent, you won’t have access to the training, marketing tools, support, and network that a national brand can offer you. This will make it harder to compete against bigger real estate companies and grow your business.
With less access to resources and no brand name behind you, it may be difficult to compete against companies that have much larger customer bases and budgets.
Your choice between franchise and independent real estate brokerage
The choice of how to start and operate as a real estate agent is not an easy one to make. In this article, we have only been able to scratch the surface of the advantages and disadvantages of each business model. There is a lot more to think about under each heading before deciding whether starting a business or buying a franchise is best for you.
In summary, a real estate franchise offers you a chance to start your own business. The franchisor will give you marketing materials, training, and experience. As a franchisee, you also benefit from the strength of a larger company behind you.
On the other hand, if you are someone who loves being creative and wants to have more control over your business, then going into business as an independent real estate agent might be for you.
How do you best decide? The first step is to take our franchise aptitude test now. It only takes a few minutes, and it will provide you with highly valuable and actionable insight. After this, you’ll be much better equipped to discuss your individual and unique position with the franchise brokers you can trust: New Ground Consulting.