Franchises and the Next Five Years

Rob Forde, new CEO at Harcourts NSW discusses why the franchise model is more relevant than ever.

In 2011-12 the real estate industry generated $9.0 billion in revenue, resulting in $631.6 million in profit, which was shared among 33,503 offices throughout Australia. In recent years we have seen the reports of approximately one in six real estate agents abandoning the industry, which totals in excess of 10,000 sales consultants. It is not breaking news to those in the industry that there has been high turnover in recent years, and that most real estate agents that have left the industry over the last five years have had less than five years’ experience behind them.

This exodus has created an environment where business owners must consolidate their position in the market and seek opportunities to recruit and increase market share. All selling principals are faced with the dilemma of how to run a profitable business and lead a team, while at the same time generating sales themselves. Having a franchisor that has the tools to assist business owners in the recruitment of skilled practitioners is invaluable in this market.

In March this year IBISWorld published a report which forecasts an increase in revenue of 1.6 per cent per annum over the next five years, which will see the revenue increase from its current level to $9.8 billion in 2016-17. If these forecasts are in fact true – as indicators across a range of economic, financial and demographic conditions suggest – this is a good sign for those who remain in the industry. The difficulty and uncertainty for all of those currently in the industry is how today’s real estate professional will remain relevant to the consumer in 2016-17. We know turnover in the real estate cycle is ultimately driven by economic factors such as access to debt funding and interest rates, and also by population growth and availability of housing. What do we learn from this and how do we become relevant to tomorrow’s consumer?

In my mind I have no doubt that in the current climate the franchise model is more relevant than ever. The real estate industry is one of the most competitive in the Australian economy. To be focused on growing a business to generate profit, manage and develop a successful team and stay up to date with the latest technology, while, in some cases, concentrating on your own sales, can at times feel almost impossible. It is all very well for me to say this, but it is up to the franchisor to take responsibility for ensuring a strong culture within an organisation. This culture will benefit everyone in the group in their respective roles, giving them the ability to be heard and the training to implement with confidence all the systems provided for them.

In my opinion, the following points are the three key areas where a strong franchise group can have a very positive impact in a real estate business.

Vision. In order for a franchise group to remain relevant, they need always to be progressive and understand changes in consumer behaviour and market conditions. The ability to see what is going to be relevant to the consumer in an ever-changing landscape, and also to provide a support platform and positive environment for everyone within the group, is essential. It is
imperative in today’s market to have close associations with finance, insurance, utility providers and other professional services, which help to strengthen the relationship with consumers.

Support. And no, I am not just talking about IT support. The competitive nature of real estate business means that there is always someone trying to challenge your position in the market. Having a well thought-out and maintained business plan is vital to the success of a business. In individual sales, we all talk about the importance of having a plan and target to work towards, so why is it that so many business owners don’t have a well maintained and thought-out business plan? A dedicated franchisor will have regular planning meetings with their business owners/principals to ensure they are focused on the long term target of making a healthy profit. By no means do I think business owners need to be micro-managed, but I do think the franchisor has the responsibility to work with their business owners, looking at all aspects of a real estate agency, offering guidance and vision, helping them grow and develop stronger, more profitable enterprises.

Technology. The habits of society are forever changing. The internet and social media have changed the way that everyone in society communicates. While this has created greater efficiencies in business, it has also created a large amount of uncertainty. The nature of real estate means that it is not just a profession but a lifestyle, and we must stay at the forefront of technology in order not to be left behind. Nothing will ever substitute being face-to-face with a client, but the internet and social media can influence the way in which we manage a relationship. I believe the franchisor has the responsibility to develop products and strategies that can be implemented in each and every marketplace. Business owners should not have to spend their time developing Search Engine Optimisation strategies or new marketing material to keep them relevant to today’s consumer.

There is an enormous opportunity within the Australian marketplace. We know many practitioners have left the industry, which has presented an opportunity for growth among those who remain in it. I think the next 12 months will be crucial, not just to the success of individual real estate businesses but also for brands. Now, more than ever, the franchisor has to be playing an active role in each and every business, to ensure the business owners, sales people, property management and administration teams remain relevant to their consumer base. Having a strong relationship and the confidence of your franchisor to deliver the vision, support and technology platforms will ensure you are one of those who will be enjoying their share of the $9.8 billion in revenue in five years’ time.

Rob Forde is the Chief Executive Officer of Harcourts NSW.

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