Does size matter? A note on real estate franchising

Some real estate groups pride themselves on their sprawling networks, others on the power of their brand. Real Estate Business takes a closer look franchising.

Every week Real Estate Business receives bundles of emails from franchise groups announcing the opening of new offices across the country, top agents who have made another record sale, tales of enviable listings and big talk of innovative strategies.

It’s not too often that the managing director of one of Australia’s oldest agencies buys the whole group. So when we learned that Andrew Cocks had snapped up R&W, we were keen to find out more about the man behind the brand.

First question: does he plan on taking over the nation with R&W offices on every corner? The answer, as it turns out, is no.

“I would rather have an area stay vacant than to fill it with the wrong person,” Mr Cocks says. “It’s so easy to compromise that quality and approach to reputation and integrity just by making the wrong decision and compromising your values when it comes to selection.”

When bad apples hit the headlines for all the wrong reasons, it can do significant reputational damage to a real estate franchise, and indeed the image of real estate agents generally. The whole industry suffers.

Earlier this month, national real estate network LJ Hooker was splashed across the papers when franchisees Joseph Ngo and Judy Thanh Truc (also known as Judy Nguyen) became the centre of the sudden collapse of six Victorian agencies in Glen Waverley, Keysborough, Mount Waverley, Burwood, Doncaster and Box Hill.

About 110 landlords and clients are now millions of dollars out of pocket, with people losing home deposits while others are owed rental money and bonds.

LJ Hooker has since formed a specialist team and is working closely with Consumer Affairs Victoria to assist in their ongoing investigation.

Following the revelations, LJ Hooker CEO Grant Harrod told Real Estate Business that trust account mismanagement is a contagion within the real estate sector that needs to be handled collectively.

“At the end of the day, none of us can afford to lose trust with the consumer and these sorts of events don’t assist us. On this occasion, it’s our brand that’s been affected, but tomorrow it may be another one,” Mr Harrod said.

Mr Cocks says that R&W will quite frequently not go ahead with franchise applications if it doesn’t believe they will add value to the network.

“That doesn’t mean that they are not great people, but in terms of what we are looking for they really have to fit into our collegiate, collaborative mentality and really be part of a larger network,” he said.

“I think that word ‘network’ is really important. To be a true network you need to have a connection that exists across all members of that network. That’s where you get your leverage from. That’s where you see the benefit of being part of a franchise.”

Mr Cocks believes in providing a level of engagement and honesty with his franchisees, which includes allowing them enough flexibility to operate successfully.
“We really try to protect the business decisions that each of our franchisees make,” he said.

While some groups will continue their rapid expansion into as many suburbs as possible, Mr Cocks has seen the impact that crowding a market can have on existing franchisees.

“There are lots of examples of businesses that have become disillusioned because their network has decided to put another real estate office in their suburb,” he says.

“I don’t understand why you would do that. It doesn’t make any sense to me. All it is going to do is devalue the significant brand investment you’ve made with that particular operator.”

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