Independent estate agency or franchise - which option is best?

Private Property South Africa
Property Professional

Stick with the pride or go it alone - the battle for survival continues in the real estate world.

We take a look at the franchise models and the independent agencies that have made it through the downturn and find out the secrets of their success.At one stage it seemed that there was literally an estate agency on every corner of every street in every town in South Africa. There can be little doubt that the property boom did wonders for the smaller agencies, who, all eager to get their share of the pie, opened at an alarming rate. On the other side of the coin, the larger groups reaped the benefits as more and more agents clambered to get involved with the ‘big boys’, and franchised offices blossomed everywhere. For many, position didn’t really matter and the type of agent employed was immaterial as the buying frenzy took hold. Who cared? Buyers were willing to sign any agreement, at any price, with any agency in order to get into the property action. Successful businesses plan for the good times as well as the bad, and those in the know stuck to a solid business strategy throughout and, while they have certainly felt the effects of the downturn, most are still in business. What is the secret to their success? How important is a brand and, perhaps most important of all, what gives these agencies the edge over their competitors? Many agents believe that working under the banner of a big name is the answer to success. Others, determined to go it alone, have soldiered on, consistently selling on the back of their solid reputation within the industry. Both models appear to have pros and cons, but what is clearly evident is that it is attitude and drive that dictate success. Bruce Swain, the MD of the Leapfrog Property Group that currently has 46 offices operating its banner, agrees, saying that no matter what business you’re in – but particularly real estate - the brand is only as good as its people. A good agent will always be a good agent irrespective of which brand they represent. He believes that a good agent with an independent will be a better agent with a franchise, simply because of the additional support a franchise offers.

The benefits are extensive, but include:

  • Brand recognition

  • A regional and national referral system

  • Access to the latest technological developments

  • Training and education

  • Peer recognition on a regional and national basis.

Jaco Rademeyer, a Port Elizabeth independent agency owner, who was recently named as Nedbank’s Property Professional of the Year, says agents often overlook the benefits of working with a smaller agency. “In my opinion, the franchise model is far more effective in the bigger centres where there is a larger market. In PE there are very few national and even fewer international buyers that would seek out property in this tight-knit city. The foundations of my business’s success can be laid firmly at the feet of the network of contacts that both my family and I have built up over the years.”

He says that while the larger groups offer a wide range of products aimed at supporting agents, the right independent agency with a dedicated principal can prove to be extremely beneficial. “Mentoring is a very important aspect of real estate, and if a principal is constantly looking at ways to improve his agents, the knock-on effects will be felt by everyone in the agency. I entered the industry six years ago and would urge anyone considering ‘going it alone’ to ensure that they had sound business principals and structures in place before opening the doors. Anyone who wants to succeed cannot do so half-heartedly. The property market can be ruthless and in this game it really comes down to survival of the fittest.” Kim Noyce, who owns her own agency in Durban, says that there are a number of drawbacks when operating independently. “Advertising costs are huge and as an independent contractor I do not benefit from the discounts the larger companies enjoy. However, working for myself enables me to negotiate commissions, as well as building strong professional relationships with my clients. I have been in the industry for 16 years and do not employ any agents.

I would never consider expanding or franchising the business - my name is on the line and as such only I can vouch a 100% for my business ethics.” The downturn has had an enormous impact on the number of agents currently practising in South Africa with many seeking greener pastures in other professions. What effect this will have on the industry when market conditions improve remains to be seen. However, what has become apparent is the influence of educational standards and the important role they will play in the future of South African estate agents. The days of entering the industry by default are over, and the agent of today is a totally different breed from the one of yesteryear. Franchises have the finance and the capabilities to ensure that agents not only receive the prescribed training, but by using in-house trainers, keep agents up to date with every aspect of the changes in the market. Owen Dormehl from the Dormehl Property Group believes that it is issues such as these that continue to draw top agents to the brand. “A number of highly-successful agents working for independent agencies bought into our franchise model when we established the company 18 months ago. As a franchisor it is our responsibility to win the trust of our franchisees.

The fact that we have also had a number of independent agencies converting to the Dormehl brand is, in itself, a measure of our success. The proof is in the pudding and, despite the recession, we have opened 38 offices.” He says training has proved to be a huge draw card. “We work with a recruitment company to ensure that the group continues to attract the right type of agent. Because of this, we believe we are developing a new culture, by bringing in new agents who have never sold before. Although we outsource certain aspects of our training, we have in-house trainers who, with their own expertise, continue to motivate and educate all of the agents within the group.” It’s pretty obvious that the independent agent is not going to disappear and that there is a definite place for smaller agencies. However, the recession has decreased their numbers dramatically. We are undoubtedly facing interesting times ahead, as entry-level requirements change. It remains to be seen as to whether the number of independent agencies remains static or increases when the property market stabilises, as top agents who have reaped the benefits of the brand once more strike out on their own. Article courtesy of , and is taken from their November/December 2010 issue.

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