Most leaders of franchised companies fantasize about the kind of
success Re/Max has had since its inception in 1973. Make no mistake
about it, Re/Max International Inc., No. 1 franchise in our
Franchise 500®'s Real Estate Services category, is one of
the thoroughbreds of franchising, and its rate of growth has
increased dramatically every year.
While Re/Max is a big company as franchisors go, remarkably,
it's still owned by husband-and-wife founders Dave and Gail
Liniger, who take an active part in managing it. In 2000, the
Linigers saw Re/Max add 6,500 new sales associates, more than at
any other time in the organization's history. This size has
provided Re/Max with tremendous marketing clout, and the company
boasts of making nearly 2 billion impressions using its roughly $13
million national advertising fund during 2000.
Re/Max agents aren't the actual franchisees. Rather, each
agent acts as an independent contractor working from a Re/Max
office operated by a franchisee. Re/Max has been successful, in
part, due to this innovative relationship between franchisees and
sales associates. Until Re/Max came on the scene, real estate
agents typically split sales commissions with the brokers who owned
the agencies. With Re/Max, sales associates pay a monthly fee to
the franchisee, then keep as much as 100 percent of the sales
commission. This arrangement works well for sales agents, as Re/Max
reports the average commissions for a Re/Max sales associate
totaled roughly $112,000 in 2000. Accordingly, Re/Max franchisees
spend most of their time recruiting and motivating sales associates
while managing the administrative aspects of the business.
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One of the things most striking about this chain is the
communication the company has with its franchisees and sales
agents. Re/Max requires its franchisees to maintain satellite
connectivity, and its educational program guide reads like a
community college catalog. Franchisees need only tune in to the
network to learn the finer points of running their businesses. This
information is available to the more than 64,000 Re/Max agents
worldwide, who also have access to the Re/Max members-only extranet
site, where they can send and receive referrals and participate in
educational sessions. I spoke with Mark Wolfe, a successful
franchisee in Coppell, Texas, who believes the Internet interface
will soon surpass the use of the TV feed due to the on-demand
capabilities of the Web.
To become a Re/Max franchisee, you must be a licensed real
estate broker or be affiliated with a broker, and you pay an
initial franchise fee of $10,000 to $25,000, depending on the
population density of the area where your office is located. The
initial agreement term is for five years, and the franchise
agreement requires that you reach certain minimums with respect to
how many sales associates work with you. For example, by the end of
your first year of operation, you must have at least seven sales
associates; by the beginning of year three, you must have at least
20 sales associates working within a facility of at least 2,000
square feet. By contract, if you fail to satisfy the quota at any
time, your franchise agreement is subject to termination. The
company has enforced this provision.
In Item 7 of its disclosure, the company estimates it costs as
much as $116,000 to open your Re/Max doors, but both Wolfe (who has
183 agents under his wing) and Re/Max's president, Daryl
Jesperson, agree the investment could be much more sizable if you
wanted to attract the best sales agents in a large market, such as
Dallas.
Re/Max management believes a high density of franchised offices
actually helps the business. The downside is that a Re/Max office
could be placed as close as one mile from your franchise. The good
news is, if you're interested in becoming a franchisee, plenty
of opportunities remain.
Todd D. Maddocks is a franchise attorney and small-business
consultant who is the CEO of The Worldlink Group. You can reach him
at TMaddocks@aol.com.
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