I’ve been rather silent for a few weeks and I apologize for that. I have some BIG deadlines looming and that’s pretty much occupied me. I have had lots of time for musing, though, and here’s what’s been on my mind:
The Help-U-Sell Consumer Offer and Operating System are amazing. During our last growth spurt (2004-2006, when the real estate bubble was beefing up), almost anyone could do very well as a Help-U-Sell franchisee. It seemed all you needed to do was buy a franchise, announce that you were open in the local market . . . and Sellers would knock each other down to get in the door! Ordinary Brokers sneer: ‘Sure you were doing lots of business because you were giving away the store! You couldn’t have been making any money!’ Not so. We did WAY MORE than our share of business and we were wildly profitable because, in addition to a better deal for the Seller, we had a completely different Operating System, one that didn’t squander resources chasing after non-productive agents.
The ‘anyone can be successful’ principal blew up on us as 2007 dawned. Turned out a lot of those ‘anyones’ didn’t have the skill, the desire or the HEART to continue when the market turned. They came to us when it was easy; as soon as the market became difficult and you had to WORK to make it, they left. Today we don’t have any Brokers in passive, wait for the business to come in the door mode. Our guys have gotten very good at grabbing the business by the shoulders and shaking it until something happens. Bravo.
Infinium, who owns Help-U-Sell Real Estate, has been an incredible parent. They have done everything they possibly could to ensure our offices survived and thrived. When the business shrank to a trickle and people had to choose whether to pay their Royalties or their electric bills, they agreed to put the Royalties on non-interest bearing notes, to be paid by adding additional dollars to future Royalties. In other words: if you didn’t close anything, you didn’t have a note to pay. You only paid when you had income. Go ahead, ask Coldwell Banker or Century 21 if they’ll do that for you.
In addition, Infinium temporarily reduced Royalties from the 6% specified in the Franchise Agreement to 5%. That temporary reduction is still in effect today and I have no information about when it may go away.
They also suspended the National Ad Fund contribution. Not only was this easier on our offices in a down economy, it was also done in recognition of a truth: Help-U-Sell has always been about establishing the brand LOCALLY. It’s a target marketing business model, rooted in the idea that you carve out a piece of local geography, market to it and garner big market share there.
Meanwhile, other franchised real estate offices were usually paying a 6% Royalty (7% in some cases) and a 2% National Advertising Fund contribution on every sale. 8% . . . that’s 3% more than our guys were paying during the toughest market in history. *
Hey, as long as we’re just musing, let me come out of the closet with a secret. I know this is true for one Franchisor; others may have similar programs. What agents in successful (NAME OF THAT OTHER FRANCHISE DELETED, But use your imagination) real estate offices don’t realize is that their office is not really paying 8% out of every transaction to the Franchisor. That Franchise has a program for reducing Royalties and NAF contributions for very productive offices. So when the agent brings, say, $5,000 into the office, the office usually deducts the full 8% for Royalties and NAF (@$400) and splits the balance with the agent . . . But the office turns around and only pays the franchisor, say, a total of 5% (@$250). In this made-up example, the office would pocket the additional $150 and the agent has no idea . . .
I guess that’s snippy of me. I apologize. But I’m trying to make a point here: as Franchisors go, Infinium and Help-U-Sell have been pretty benign. In fact they’ve been more than nurturing. Rather than creating a secret profit center for good offices (at the expense of their agents), Infinium chose to suspend NAF all together and cut Royalties for everyone. Having worked for other Franchisors in the past I can see this as a matter of attitude. The other guys always seemed very clear that they weren’t in the real estate business at all, they were in the franchising business. Real estate simply provided the revenue stream from which they derived their income. Their business model was all about selling more franchises and getting more agents to affiliate with the company (agents whose average productivity has declined every year for the last 15).
The Infinium/Help-U-Sell Franchisor attitude is very different. We are in the real estate business. All of us. Our Franchisees are partners. We all live and die by how effectively we serve Sellers and Buyers in local markets across the country. There are no Vice Presidents running around the halls of Help-U-Sell Corporate who came from rich careers in, say, Hotel or Car Rental Franchising . We are real estate people. We think like Brokers and before we pull the trigger on any idea, we talk to our Brokers . . . because they are a little closer to the consumers we all serve than anyone in the Corporate Tower.
*Our competitors might say the suspension of the National Ad Fund was a stupid thing for Help-U-Sell to do, that it made us less visible to consumers at a time when visibility was essential. We decided that being visible in, say, the State of Montana, where we have no offices to serve any consumer who stumbles across our marketing really would be stupid. . . especially if we used monies from our offices in , say, Pennsylvania, to do it. So we suspended the Ad Fund which in theory gave our offices more dollars to spend locally establishing the brand in a way that would benefit them. I think it’s also important to look at how the other guys spend their Ad Fund dollars. If you look at their marketing and where it is placed, it’s clear the objective is not to help their offices sell more real estate, but to help the Franchisor sell more franchises. This is sold to the offices as marketing that will help them recruit more agents . . . . and that’s a whole ‘nother topic.