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Musing About Help-U-Sell, The Franchisor

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.

Differentiation: Four Key Metrics

As a Help-U-Sell broker, you rarely have to deal with tie-breakers when it comes to listing. Usually when the seller hears your superior offer and is satisfied that you can and will deliver, he or she is ready to sign.

But there are metrics you can introduce into the conversation whether you are competing with others for the listing or not, that will boost your credibility and differentiate you from the rest of the pack.

Average Days on Market. That means from listing to pending status. How many days of marketing did your average listing endure last year before buyer and seller agreed on an offer?  That’s powerful information when you compare favorably against your peers. If your average days on market is 57, and the MLS is 85, that means you are 28 days faster (better) at getting your listings sold than your competitors. That’s huge! But even 10 days is worth crowing about. And here’s a clue: you will almost ALWAYS beat the MLS on this and the other three metrics. It’s just the nature of ‘average’ – your individual average should be better than their aggregate average. In fact, if it’s not . . . well you probably have a big problem in your business.

Average Sale Price as a % of List Price. On average, are you getting your sellers 97% of List Price in a sale? Or are you getting 95.3%? If your average Listing Price is $255,000 and your average price of a sold Listing is $253,000, you’re getting 99.2% . . . not too shabby! Now run the same calculation for the MLS. If you discover that the MLS average is 94%, you’re able to tell your sellers that you usually get your clients more than 5% more for their property than your competitors! Which is probably MORE than they are paying you! Now that’s powerful!    And, once again, if you aren’t better than the MLS in this metric . . . well, you’ve got a bigger problem.  By the way, it’s important that you count only Listing Sides here; comparing your average Listing Price with your Average Sale Price (including buyer sides) skews the results.

Per Person Productivity.  Take your total number of closed sides for last year and divide it by the number of licensed people in your office.  If you had 62 closed sides and 3 licensees, your per person productivity is better than 20 closed sides per year.  Now, compare that with the MLS. You’ll be shocked.  That average will probably be in the 6 to 10 closed sides per year range.  Now, think like a consumer for a moment.  Who do you think is going to do a better job of protecting your interests, of staying abreast of changes in the industry and finance, of solving notty problems when they arise in a transaction:  the guy who does 7 closed sides a year or the one who does 20?  Want to blow that 200 agent mega-office out of the water?  Use this metric.  You’ll beat the pants off them every time.

Fallout Rate.  Of all the sales you made last year, how many fell out of escrow?  Calculate it as a percentage and then compare that with the MLS.  Your figure might be 10% and the MLS will almost always be higher, and sometimes significantly higher.  If the MLS is 16% you can demonstrate to a seller that they are more likely to make it to closing with you than with a typical broker.

Put it all together and what does it sound like?

‘Mr. & Mrs. Seller, last year it took me, on average, 57 days to get a listing under contract.  It took the MLS – which is every other broker – 85 days, which is almost a full month longer.  So when you list with me, chances are we’re going to get this process over with quicker.  I also got my sellers, on average,  99.2% of their Listing Price.  In the MLS right now they’re only getting 94%.  So I’m getting my Sellers more for their properties than they are actually paying me!  The average agent in my office closed 20 deals last year.  In the MLS, the average was 8.  I know that’s hard to believe, but it’s true.  Who do you think is better equipped to handle your transaction and solve problems when they arise?  Thank you.  Finally, last year only 10% of my sales fell through.  In the MLS it was 16%. Put plainly:  with me, you’re going to sell faster, for more money, with less likelihood of falling out of escrow, AND you’ll have the expertise of some of the most productive people in the local market making sure everything goes as planned.’

Slam Dunk.

Now:  DO IT.  Get out your calculator, log into MLS, and run the numbers.  And tell me what you find: I’m itching to share.

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