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Perhaps I was wrong about franchises

05 November 2020 Dan Argent
Dan Argent

Anyone who’s read an opinion piece by me in the last year or so will be doing a double take at the above headline, writes Dan Argent.

You see, I’ve been happily voicing my opinion on the big-name franchise model. I’ve been calling out their approach to business because I believe they’re entrenched in inefficient practices while short-changing agent’s incomes and retaining an unjust percentage of the commission.

But then the other day, a little voice inside my head said, “Maybe the role of franchises is not outdated… maybe there is something they do to add value.”

And you know what? That persistent voice was right. I dug deep, searched my soul and realised big franchise agencies are performing a necessary function in today’s real estate sales industry.

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Here’s what my journey of discovery unearthed.

Couldn’t live without them… for now

There is a key task I believe big franchises are suited for.

Now it isn’t the ability to help agents get ahead financially. You only need look at the traditional commission structure which sees agents who do all the work securing listings, opening houses, making sales and managing deals receive just a pittance of the commission.

So, scratch that essential job as something they do well.

Also, big franchises are falling short on the listings front for today’s agents. Decades ago, the primary way an agent secured listings was via a combination of luck (being on “roster” when someone walked in wanting to sell) and being employed by a high-profile agency.

You see, in that time before the internet (some readers won’t remember that far back), sellers would seek out a listing agent by walking their suburb’s high street and stumbling into a brand-name office to seek help.

Of course, they did. That business name was the one they saw in the paper or on the TV.

As this potential seller entered the shopfront, they’d be greeted by whichever agent was rostered on to work that day. The agent would make their pitch and hope to lock in the listing.

But those days are gone — no one lists with the agency, they list with the agent. Nowadays, vendors choose individual agents by reputation and track performance. Nobody selects their professional based on which franchise they work for.

So, scrap “listing generation” as a franchise advantage, too.

And, if we’re being honest, you can forget the claim that only a franchise can provide the most comprehensive marketing exposure for a property. I hate to break it to them, but 100 per cent of buyers are scouring listing portals. They stopped looking at listing placards through shopfronts almost two decades ago. And while a flashy and expensive full-page advert in your local newspaper might seem appealing, in most instances it’s a secondary method of exposure attracting mostly tyre kickers to open homes.

I guess we can ignore marketing as a franchise benefit, too.

No, there’s only one area of the business where I see big franchise agencies provide a necessary service, and that’s helping newbies establish themselves.

The franchise benefit

Yes. There are few better way for a new agent to learn the ropes than by joining an office, and working with the best agent they can find.

Why? Because when you begin in this industry, you don’t know anything, and more importantly nobody knows you. You must learn how to prospect and chase listings. You need an opportunity to grind and negotiate. You need to become an area expert and start to establish a name for yourself.

None of these are talents you’re born with. Young agents must earn their stripes and it’s the role of the agency to give them that opportunity.

And what does the agency receive from the deal? It gets to retain most of the commission while paying these young agents a modest wage to do much of the grunt work.

It’s a two-way street of benefit for both the agent and the agency. The business gets relatively affordable manpower, and the new agent get an education.

Agencies aren’t redundant, but their role has changed

I concede — agencies are good for something.

For without them, how do we teach the next generation of superstars, build their skills and establish their networks in preparation for one day going out and making it on their own.

Because, like any student, agents shouldn’t stay in “school” forever. They eventually need to graduate and forge their own path.

In fact, once an agent is writing $250,000 GCI or more, is securing 80 per cent of their listings via previous clients, referrals, open homes or their own prospecting, and has started to establish a name for themselves in a particular market, it’s time to make the move.

So, to those “junior burgers” out there, join in, learn what you can and enjoy the experience, but when you hit those key benchmarks, it’s time to stop giving away half of your commission; start working for yourself and building your own brand.

It’s time to make real estate great again, and empower the next generation of agents to thrive.

By Dan Argent, UrbanX

Perhaps I was wrong about franchises
Dan Argent reb
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