Franchising is becoming an increasingly popular business model, but for many this is still an unknown quantity particularly in estate agency. Here, in layman's terms, are the answers to some immediate questions you may have. Serious candidates will want to contact the Reeds Rains franchise team directly to discuss.

What exactly is franchising?

Technically a franchise is a licence granted to an individual or firm to run a business in an assigned territory using another firm’s proven brand and systems. In reality, while it is all of these things, it is also a partnership between the franchisor and the franchisee which, although underpinned with a legal franchise agreement, is dependent for its success on the delivery of the products and services by the franchisor and the continuing commitment and motivation of the franchisee.

What costs are involved in franchising?

Specific to a franchise is the initial franchise fee which is paid on completion of the signing formalities and thereafter a monthly management service fee or royalty paid as a percentage of gross revenues earned. In estate agency franchising this can be as much as 10%. In the case of the Reeds Rains franchise this figure is typically 8%.

Are there any other franchise costs?

There are additional charges for start-up costs and for on-going technology but these are passed on at competitive rates. There are no additional charges unless these originate from a third party supplier in which case these are passed onto the franchisee at the same competitive rates. It is common in some estate agency franchises to require franchisees to buy through a central buying system. However, in Reeds Rains there is no obligation to participate in the buyer programmes, although it is likely that Reeds Rains will obtain lower prices than individuals can achieve by themselves. Some property management charges will apply depending on the option chosen.

I can see it works in McDonalds, does franchising really work in the service sector?

Yes! The world of estate agency is becoming ever more complex as the industry has to embrace new concepts in marketing and applied technology in a competitive environment. There is also the increasing burden of regulation, both specific to the property sector and generally in recruitment and compliance. In the light of these developments, the concept of operating a service sector business under an established brand with full regulatory and commercial backup and support becomes ever more compelling.

So what are the critical success factors for a franchise?

In the case of estate agency it boils down to the right people and the right location. If the franchisor delivers their side of the bargain, the success of the business thereafter will be down to your motivation, your commitment, your skill applied consistently to achieve first class results. The relationship between the franchisor and franchisee is also important. Both sides must feel good about this from the outset.

Do I need to be an estate agent?

The UK residential property market is currently an unrestricted and turbulent operating environment. A Reeds Rains franchise may suit an existing estate agency operation or ambitious employee wishing to set up on their own. Suitably motivated entrepreneurs from outside the sector will make successful estate agents, but in the early months they will be required to commit to recruiting experienced personnel.

How much money will I need to set up an estate agency franchise?

In addition to the initial property franchise fee there will be other set up costs for the branch in particular re-decoration, wiring, lighting, fittings, furniture, computers and phones. From this point on there is also the need for working capital to run the business until the income streams materialise. As most people are aware, 90 days can elapse between listing and completion, the point at which the agents receive their commissions. Although this will vary according to the branch size, location, current condition etc, we expect that franchisees will need to raise at least £120,000 to £150,000 (although some more expensive locations may be higher) in total to cover these one-time costs and working capital requirements. In recent years banks have been reluctant to lend against estate agency business, so you will need to source this money independently.

Why is Reeds Rains engaging in franchising?

Reeds Rains has always been a growing organisation and expansion of its branch network through franchising is consistent with the implementation of that strategy; it also provides a bigger distribution platform for ancillary services such as conveyancing, financial services and surveys. This of course is also beneficial to the franchisee.

How long is a Reeds Rains property franchise?

The initial term is for five years, with two further automatic options to renew for five years. Reeds Rains charges only a small fee for the extension of its franchise.

Tell me more about the Reeds Rains franchise agreement

Firstly a general point. The franchise agreements are always the legal safety net underpinning the obligations of both parties. While this is an agreement between two parties, certain clauses and obligations are in place to protect the Reeds Rains franchise network as a whole. The Reeds Rains franchise agreement has been drawn up by lawyers approved by the British Franchise Association, and their thumbprint of approval means the agreement will be both well balanced, comprehensive and current.

What do I get apart from the brand?

Reeds Rains delivers support and expertise to its franchisees in addition to the prestige of its brand. In the case of the Reeds Rains franchise the benefits are too numerous to list here but can be classified under the following headings; plug-in access to additional business activities and cheaper resources, training, technology, marketing, business advice and the ability to be able to refer business within a large regional network.

Are there any restrictions?

Franchises are characterised by the setting of territorial limits and this is the case with the Reeds Rains franchise. Territories are defined by postcodes but set to reflect the boundaries of natural markets. The objective is to provide the franchisee with a territorial market place sufficient to make an honest profit with a sensible and achievable market share. Reed Rains franchisees are debarred from participating in any other estate agency businesses outside the Reeds Rains franchise. This is common sense and standard to all franchise systems – franchisees clearly could not be allowed to use the system skills and advice outside the chosen franchise in a common or competing business. Franchisees are at liberty to engage in other business activities outside the property sector subject to demonstrating total commitment to developing the designated franchise branch.

Can I open additional branches?

The Reeds Rains franchise mission is to work with our franchisees to grow their business, so the opening of additional branches is a natural extension of this and an obvious way forward. This long term view will form part of the discussions prior to signing. If commercially beneficial, franchisees may open additional branches but each is subject to its own franchise agreement. 

Do I have to participate in the other business activities?

Residential sales is the core business activity of an estate agent, the appeal for Reeds Rains franchisees is that you can participate in additional business activities (such as lettings, financial services, conveyancing, land & new homes) on a plug and play basis without the time effort and money required for invention and long lead-in times. The Reeds Rains franchise allows these to be optional activities but if adopted must operate through the established Reeds Rains systems on a referral.

What’s the process for becoming a franchisee?

The process is simple, both sides need to agree to a series of meetings to establish mutual intent and reach a point where an informed decision to proceed can be made. This involves an interview process to establish the credentials of the prospective franchise, presentations of the Reeds Rains Franchises systems together with validation visits, a basic financial forecasting session to establish one-time set-up costs and future profits based on local market assumptions and other criteria. Once there is a handshake, there follows accreditation and a comprehensive contract review followed by completion of the formalities. The implementation programme follows immediately. If both sides are serious the process from enquiry to signing could take as little as four to six weeks.

Describe the implementation programme

This depends on whether the franchisee has branch premises already in place. If so, a launch date is set and the implementation programme covering branch profiling, recruitment, pre-launch marketing, technology integration, induction training, financial plan etc. is implemented with specified responsibilities on both sides.

I’m interested, I think I qualify, what do I do next?

Talk to us – fill in the franchise contact form. However, we understand you may still be currently employed and assure you of total discretion and confidentiality.

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