Estate agency used to be almost a cottage industry, composed mainly of independent, locally run businesses.
Not any more. Increasingly, national brands are dominating the sector, making it more difficult for others to lever their way into the market.
Franchisees don’t even need to have experience in estate agency — although you do usually need experience in management and a certain amount of business acumen
However, franchising can offer an easier route in. Franchisees don’t even need to have experience in estate agency — although you do usually need experience in management and a certain amount of business acumen.
Your Move, for example, has around 50 franchise outlets, which are split between experienced and non-industry operators. Most franchisees do have some solid interest in the property market — many, for example, have property portfolios or have had some role in financial services related to residential property.
Management skill
Darren James, head of franchising at the company, describes what the company looks for in a franchisee: “Many franchisees have no direct experience, although you need to be of a certain age and certain maturity, and have a level of management skill.
“Background is not necessarily an indicator of success. You need to manage and motivate staff, but we do provide training in both systems and agency skills. The important thing is having — or recruiting — a highly qualified valuation manager.”
He adds that some franchisees want to fill that position themselves, in which case they need selling skills. They must also have an understanding of increasing government monitoring of financial services, particularly with regard to money laundering and the role of the financial ombudsman.
To join Your Move as a franchisee, you need to stump up between £50k and £60k. The company can arrange a loan of up to £70k of the £100k needed to cover the acquisition of suitable premises and the installation of a typical Your Move fit-out.
The company charges an initial fee of £25k plus VAT per branch and then a monthly management fee of 8% on gross turnover. IT is charged at cost and will vary according to your particular requirements. Adds James: “You will also need funds for the first few months in which you’re not earning, but still have the costs of running the business.”
If you choose the alternative route — buying an existing business — this will not be a problem, as cash flows will be established.
But buying a successful agency, James says, can cost up to £1m. Cheaper agencies can be found, but will require significant investment in terms of time, energy and money.
Franchisees with Your Move can still sell the business on and take a share of any increased value. But the buyer must be approved as a ‘fit and proper person’ and must be able to comply with the increasingly strict regulation of the Financial Services Agency.
As well as ‘cold start’ franchises — where a completely new business is set up — Your Move also offers existing estate agents the chance to come under the brand’s umbrella and expand their business, thereby taking advantage of the marketing, advertising and IT spend of one of the UK’s largest estate agencies. However, this will depend on whether an independent estate agency’s territory is available in the Your Move network.
Given that estate agents can achieve typical fees of 0.5%-1%, meaning they earn around £1.5k on a typical house, the financial rewards are considerable. Your Move claims it is possible to make over £500k over a five-year period.
But this wouldn’t be entirely composed of commission from sales and lettings. Your Move used to be part of Norwich Union and still has expertise in home loans and other products. It also offers life assurance, home insurance and conveyancing.
Because of the number of variables, James is unwilling to put an exact figure on the potential earnings of a typical franchise. “There is a massive range,” he says.
“It comes down to how you run the business. You can make a living by working reasonably hard. If you’re prepared to put more time into it, you can earn more.”
He says that some managers will work 9am to 5.30pm, whereas others will work until late in the evening. And although many agencies open six days a week, the dedicated will operate every day, in which case a shift system becomes a must.
