Opinion: Surely it is better to go it alone than buy into a franchise?

Anyone considering working for or setting up an estate agency franchise right now must need their head testing.

Not only is it a challenging time to start up an estate agency business, given the stagnant housing market and extortionate marketing costs, but many of the franchises themselves have seen a sizeable collapse in their share prices, with Hunters and Belvoir down by a half, Winkworth a third and the Property Franchise Group by a quarter from their all-time high, causing confidence to plummet.

Of course, it’s not just franchises who are feeling the pinch, with all eyes on Countrywide right now to see if their not-so-nattily-titled Back to Basics ‘Distribution Strategy’ will lift them out of their sink hole and up their share price from its paltry all-time low of under 10p!

In my last column, I questioned whether investing in estate agency right now is a good bet, and that includes buying into franchise operations, in particular those American-owned franchises which are trying to get a foothold in the UK market.

Why would franchisees choose to buy into something with so little brand awareness right now and give such a high amount of their hard-earned commission back to the USA or UK master franchise holders?

For example, I fear Keller Williams will have limited success if their plan is to focus on getting referrals instead of marketing their business. We all hope to do a good job so clients tell their friends about their great experience, but you won’t get any business in the first place if your marketing is invisible.

Even those with a high street presence like RE/MAX and Century 21 haven’t had the impact over here that you’d expect, given the size of their operations overseas.

For those with little estate agency experience, there are advantages of buying into a franchise, such as support and training and an already functioning website. But very quickly, if you’re doing a good job, you’ll come to resent paying a large percentage of the money you’re earning to those who are higher up the business chain. So why not go it alone?

It’s a difficult decision for those wanting to start out right now – but there must surely be a question mark as to whether franchising is the way forward.

What does the future hold for online agents?

Just five months after Emoov’s purchase of Tepilo and Urban, Emoov founder Russell Quirk has put the business up for sale.

Even though he says there are interested parties, with Foxtons rumoured to be one of them, you can’t help but wonder why anyone would want to buy such a enterprise.

The vocal entrepreneur admitted himself in a carpool karaoke-style interview – some may describe it more as a car crash interview – that Tepilo’s big shareholders hadn’t come through with the money they’d promised. He said he’d been ‘let down by some of our shareholders based on what was promised, signed and ultimately delivered’.

This raises questions as to what was promised and by whom? Why would anyone buy shares in a business and then pull the plug on any promised funding so quickly? What went wrong? What gave them cold feet? Or was there more to this deal than meets the eye?

Plus, what now for those who work for the newly united businesses? What does their future hold? And for the customers whose purchases are currently going through? And for those who will undoubtedly think twice about signing up?

Quirk has also confirmed what I’ve been saying all along. That online estate agency is unprofitable based on the fees being charged.

Connells abandoned Hatched, and Countrywide dropped its failed online experiment. Even Purplebricks has yet to return any profits, despite its best efforts to run high street agents out of business.

Quirk also conceded that you need a critical mass of around 30,000 annual listings if charging less than £1,000 up front, regardless of whether you sell.

What investor is going to want to buy Emoov/Tepilo/Urban knowing how much money they’ll need to ‘burn’, in Russell Quirk’s words, in order to grow?

The industry has not been kind to Quirk, believing him to be an outspoken man who is good at his own PR.

But one thing I can tell you about entrepreneurs is that they learn from their setbacks and they usually bounce back. I’ve a feeling we haven’t heard the last of Russell Quirk just yet.

Keep an eye on your sellers

How often do you check what happened to properties marketed by you that were subsequently taken off the market, to see if they did eventually sell – and to whom?

We’ve been keeping a close eye on Land Registry data for some time now and marrying it with voter records as well as our own to see if the purchasers had indeed been introduced by us in the first place.

So far, we’ve recouped over £1m in fees, with a number of vendors taken to court while others have paid up before legal action commenced.

It’s a shame that some sellers stoop so low and do a private deal with people we’ve introduced – even though they’re aware of the risks of being caught.

You’ve spent time and money on promoting their property – so don’t let them get away with it!

Turn detective on those fraudulent and untruthful sellers – you might be horrified by just how much money you’ve lost!

Paul Smith is CEO of Spicerhaart and a regular columnist for EYE

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13 Comments

  1. ArthurHouse02

    Christ £1million in fees recovered, over how long a period is this. Thus figure seems awfully high and if so many of your vendors are doing the dirty on you, does that say something about them or something about your relationship with them?

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    1. BALLY07

      try employing staff over the age of 17.. that will retain your clients! 

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  2. DarrelKwong43

    Surely a Proptech solution out there if someone is losing a potential million in fees

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    1. P-Daddy

      People win not algorithms.#proptechoverhyped

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  3. J1

    Another self interest piece…..

    Slagging others off didn’t get Mr Quirk very far either!!!!!

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  4. Bless You

    I don’t know. We know a franchisee that is grumpy and thinks they are posh. Their franchise has them doing all kinds of charity work which makes them talk to the little people. It’s helped their business but tbf they don’t deserve it.

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  5. agent123

    Bitter over the move of his old MD to Keller Williams or concerned staff will be following with him??

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  6. 70GJ

    Those who can set up on their own,

    Those who can’t buy a franchise

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    1. Estate Agent W1

      Never has such tosh been written in 14 words 70GJ

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  7. paulnewboy26

    The reason I set up on my own, is because your agent Paul was so poor in my town it was easy pickings!!! If you focus so much of your time on vendors who don’t want to pay you, you’re doing things wrong “take the hint”. I would be mortified if any of my customers remotely did this, pure failure in service, trust and relationship. You carry on doing what you do Haart, it makes life easy for us…..Oh, one thing you could stop doing, is calling my vendors within a day of marketing claiming you have cash buyers, when you can’t sell the neighbouring property for 3 months?

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  8. MartinMass53

    Your spurious claims about franchising shows that you fear the bastion of franchising in these difficult times.

    An entrepreneur with any foresight or knowledge of risk management will know that to set out without support, including; branding, marketing, finance, technical help, compliance, structure, ongoing advice, business suggestions, internal networking, software, acquisitions – need I go on, in these difficult times is most definately a poor option.

    As you are plainly unaware of the value of franchising or choose to make statements you do not believe in I think the wise entrepreneur will store your advice with the latest statistics from ple Bricks

     

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  9. Gloucester_Agent

    The Smith articles are becoming increasingly desperate to read. He is beginning to resemble the old lush propping up the bar having a good old gossip about anyone and everyone. In this article alone he has discussed –
    Hunters
    Belvoir
    Winkworth
    Property Franchise Group
    Countrywide
    Keller Williams
    Re/Max
    Century 21
    Emoov
    Tepilo
    Urban
    Foxtons
    Connells
    Hatched
    PurpleBricks
    Whilst he is sat critiquing other businesses his own lads in shiny suits are operating like dodgy double glazing salesmen.

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    1. BALLY07

      getting embarrassing now for him….

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