To The Max
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 500Â®'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.
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.
- Re/Max International Inc., email@example.com