For decades, the traditional franchise office has been a familiar pathway for real estate principals, offering the backing of an established brand, access to systems and support, and the opportunity to build a business within a larger network.
But with rents, insurance, technology subscriptions and compliance obligations putting pressure on agency budgets, the question of whether that structure still makes financial sense is becoming increasingly relevant.
For Mindy Powell-Hodges, Country Leader, eXp Australia, the conversation is not about abandoning established brands, but understanding what an agency is paying for and whether those expenses are delivering a worthwhile return.
Having worked across traditional franchise networks before moving into the cloud-based brokerage space, Mindy believes technology has changed the economics of running a real estate business, giving agents access to systems and resources that were once largely associated with major networks.
“Property technology has changed the game considerably, particularly with younger generations coming through who are extremely comfortable using it,” she says.
“The strongest agents are using technology to free up their time so they can spend more of it with clients, because at the end of the day, real estate is still a relationship-driven business.”
While the relationship between agents and clients remains central to the industry, she believes the systems supporting those relationships have changed considerably, creating opportunities for businesses to reconsider their overheads.
“When I look at everything that has happened over the past few years, from rents and insurance to subscriptions and technology, the cost of running a business has changed significantly,” she says.
“When I was an agent in 2009, we were still using print media and complaining about how expensive advertising in the Manly Daily had become. Now we have the property portals, alongside franchise fees, marketing contributions and technology charges.
“If you’re looking at your business structure and going through your profit and loss statement line by line, those costs represent a significant amount of money, particularly when you consider that some of those fees are fixed, regardless of how the month has gone.
“Every model has costs, so it’s about knowing exactly what you’re getting for them.”
For agencies operating in competitive markets, where commission income can fluctuate but many expenses remain fixed, those commitments can place considerable pressure on profitability.
Mindy believes principals should be prepared to examine their financial position without assuming that a familiar business model is necessarily the most efficient.
“If I were running a business generating a couple of million dollars in gross commission income, I would sit down and work through those costs carefully, because once you account for everything, there may not be as much left as you would expect.”
She also believes the increasing administrative and compliance demands placed on agents are another reason to reconsider how agencies operate.
“I absolutely support transparency and compliance. It does mean businesses need to be really clear on where their time and money are going,” she said.
“When you combine those obligations with the cost of running an office, it becomes increasingly important to understand whether your business structure is supporting you or simply adding to the financial burden.”
The biggest obstacle isn’t always money
Of course, identifying a potentially cheaper business structure and actually making the move are two very different things.
For many principals, the financial argument may be relatively straightforward, but the prospect of disrupting an established business is considerably more complicated.
There are employees to consider, existing relationships, branding, technology systems and, perhaps most importantly, the uncertainty of how a team will respond.
Mindy thinks these concerns are among the biggest reasons principals remain with their existing networks, even when they are questioning the economics.
“Change is difficult, particularly when you’re responsible for a team and have spent years building a business,” she says.
“One of the first concerns principals have is how they’re going to explain the decision to their people. What happens if the team doesn’t like it? What happens if their best agent decides to leave?
“Those are genuine concerns because once an agent reaches a certain level of performance, they’re already receiving approaches from other businesses. The last thing a principal wants to do is create uncertainty that might encourage someone to leave.”
For principals who have spent years building a team, the possibility of losing a top performer can outweigh the attraction of lower operating costs.
However, Mindy believes a more economical business structure can also give principals greater flexibility to reward and retain their people.
“A more economical model can create more room to reward your agents.
“That might mean better earning potential once they reach a particular level of performance, incentives, or other ways to reward the people contributing to the business.
“In a traditional franchise structure, there can be limitations on how much you can offer before you start giving away part of the business itself. Reducing those overheads can create more options.”
But the decision is not purely financial. Traditional franchises can provide brand recognition, mentoring, training, established systems and a sense of belonging to a larger network, all of which may be particularly valuable to principals and agents.
Mindy acknowledges that culture can be a genuine strength of established networks, particularly for those who are deeply involved in them.
However, she questions whether principals should rely on a franchise to create the culture within their own offices.
“As a business owner, you need to create your own culture and be the leader that you would want to work for, rather than relying entirely on a network to provide that environment,” she says.
“You’re the person working alongside your team every day, and while conferences, training and broader network support certainly have their place, the culture of a business is ultimately created by the people within it.
“That responsibility sits with the leader, regardless of the model.”
Regardless of the business structure, the responsibility for retaining good people and building a productive working environment ultimately remains with the principal.
A different way of doing business
The choice is no longer simply between opening a franchise office and operating completely independently.
Boutique agencies, independent brands and cloud-based brokerage models offer different approaches to ownership, overheads, technology and support, allowing principals to consider which structure best suits their business.
Mindy thinks the growing range of options is encouraging more agents to examine whether they need a traditional office and franchise arrangement to operate successfully.
“I think everyone is looking for solutions, but understandably, it can feel like a bigger step for people who have built their whole career within one network,” she says.
“At the same time, we’re seeing plenty of boutique and independent operators who want greater flexibility, although real estate is still an industry where people value being connected to a wider network.
“Most agents want to feel that they’re part of a successful team, so the challenge is finding a structure that provides that connection without necessarily carrying all the traditional costs.”
At eXp, Mindy works within a cloud-based brokerage structure that offers an alternative to the traditional franchise office, with technology, marketing resources and administrative support incorporated into the model.
But she believes the broader conversation should not be about any one network. Instead, principals need to consider whether their current structure provides the flexibility, support and financial returns they need to build a sustainable business.
A lower ongoing fee does not automatically translate into a better business outcome, particularly if an agency incurs additional expenses or loses valuable support during the transition.
Equally, continuing to pay for services simply because they have always been part of the business may prevent principals from identifying opportunities to operate more efficiently.
Mindy says technology and administrative support are among the first things agents want to understand when considering an alternative model.
“Technology is one of the most common questions because every network talks about the systems and tools it provides.
“Agents want to know whether they’re going to have access to the same essential resources, including their CRM, marketing platforms and the technology they rely on to manage their business.
“The systems may operate differently depending on the platform, but the important thing is making sure agents have what they need to do their jobs effectively, without having to piece everything together themselves.”
She believes technology will continue to influence how agencies are structured, particularly as artificial intelligence becomes more closely integrated with everyday systems.
Having seen how eXp’s global network is approaching this overseas, Mindy sees opportunities for Australian agents to use AI to access information and complete administrative tasks more efficiently.
“One of the emerging developments I found particularly interesting was the ability to connect the AI tools people are already using with the systems within their business,” she says.
“For example, an agent could ask a platform to review their previous sales in a particular area, identify comparable properties and prepare a report using information already held within their systems.
“They could also review previous marketing campaigns, identify which performed best and use that information to help prepare their next campaign. It’s about making the information more accessible and reducing the time spent moving between different systems.”
The appeal of such technology is not necessarily that it replaces the work agents do, but that it could reduce the time spent on administration and allow them to focus on listing, selling and maintaining client relationships.
Making the move without losing the business
While the economics of alternative structures may appeal to some principals, Mindy thinks the transition itself requires careful planning.
Changing networks or business models can involve moving technology systems, updating branding, reviewing remuneration arrangements and communicating the decision to staff and clients.
For principals who have spent years operating within a particular network, the prospect of stepping away from a familiar structure can be confronting.
Mindy says the starting point should be a clear understanding of what the business needs and how any proposed change would affect the people working within it.
“The first thing I encourage principals to do is sit down and work through what the transition would actually look like.
“How are they going to have those conversations with their team? What support will they need? How can they demonstrate that the change could create opportunities for their agents as well as the business?
“Once you start working through those questions, the process becomes much more practical and less about the uncertainty surrounding the decision.”
She says the way principals approach change can be just as important as the structure they ultimately choose.
Recalling a previous technology rollout, Mindy described a leader who was hesitant about a new system and found their team was too. Her observation was that the team was taking its lead from the manager.
“If the person leading the team doesn’t want to make the change, the people working with them are going to pick up on that,” she says.
“As a principal or business owner, it’s your responsibility to lead that process and create the environment where people feel comfortable moving forward.”
It is a reminder that changing an agency’s business model is not simply an exercise in reducing overheads. It requires leadership, communication and a willingness to reconsider established ways of working.
And despite her preference for more flexible structures, Mindy acknowledges that the right decision will not be the same for every principal.
“Don’t be afraid to explore the alternatives, but make sure you move at the right pace and choose what’s appropriate for your business,” she says.
“Whether it’s eXp or another structure entirely, you need to consider your people, your culture and what you’re trying to achieve.
“Different models suit different businesses, and as the leader, you’re the person who has to bring the energy and direction that will make that decision work.”
And with more options available than ever before, she says staying put should be just as considered a business decision as making the move.