Three Franchisors Talk About Salaries, Differences, and the Future

A new survey shows your central role in the transaction is one of the constants in an otherwise swirling marketplace.

February 1, 1998

Industry observers these days are forecasting a paradigm shift in the way the business works and the way brokers compensate their sales force. But leaders within three major franchises are telling a different story.

We talked with James Shapiro, CEO, Windermere Real Estate Inc., a regional franchisor based in Seattle with about 5,000 salespeople; Daryl Jesperson, president of RE/MAX International, which has 47,000 salespeople, as of November 1997; and Robert Moles, president and chief executive of Century 21, which weighs in with 110,000 practitioners, about how they see their companies, and the industry, now and in the future.

What’s the future in terms of the franchise marketplace?

Shapiro: The strong regionals will continue to attract salespeople who don’t want to be associated with large nationals. National owners are fine, but they have a one-size-fits-all attitude.

In terms of a possible reversal of the trend toward consolidation and the growth of franchises, that could happen. Real estate was a cottage industry until a very short time ago. Wall Street discovered the business, and things went wild. But when you get down to it, this is a business of relationships, and it always will be.

Jesperson: I don’t see further constricting of the big nationals. You're not going to see any more unification under one banner. You'll see people jumping from one franchise to another, but you won't see one franchise gobbling up the next.

In the future, we’ll continue to witness the demise of the midsize broker, who'll be unable to compete given the economies of scale. If you want to offer your salespeople a voice mail system, the smallest one has 15 mailboxes. The next size up has 99. So, either you're small or you're big.

Moles: There are now six nationals, and of those, you have three or four that are really dominant players. So you won't see more than six, but you might see fewer—maybe only three down the line.

Will brokerages abandon commissions and instead pay salespeople salaries?

Shapiro: I can’t say it won't happen, but when you have independent contractors, I can’t see it working very well. Salary is a buzzword right now, but the idea comes and goes. I hate to use the word never, but then again, it'll be really hard to change when the entire country is working on commissions.

Jesperson: You don’t ever have to worry about RE/MAX going to salaries. We firmly believe that people are motivated when it’s in their best interest. Salaries have been tried, but I've been in the business since 1975 and know of no successes with it.

The business attracts people who are paid to take risks. You might see more support people on salary at brokerages where brokers extend services to the salespeople.

Moles: The chances are relatively remote that it'll sweep the industry. The only way that would ever happen is if the federal government changes the law as it relates to independent contractors. This is a cyclical industry, and paying commissions is suited to this kind of industry.

What sets you apart from the rest of the industry?

Shapiro: We operate in three states, which gives us a different approach from that of the national companies. Our philosophy isn’t to go around sticking our finger up in the air saying we’re No. 1. We work at being the best employer, and that means being supportive in a number of creative ways. We have a retirement plan for our associates. We began it about three years ago, and the company contributes to the plan. It’s not a matching-dollar plan--we pay into it on the basis of productivity and length of service. We also offer health insurance.

Jesperson: We're Main Street, not Wall Street, like some of the others. This is the only real estate franchisethat’s still run by its founders, who were real estate practitioners. From the top down, we’re real estate people.

We're not chasing ancillary profit centers and other tangents. We want to be known as the best real estate practitioners in the galaxy.

Moles: We're the world's largest sales corporation, with practitioners in 21 countries. We have distinct advantages just because of our size. We have a huge technological infrastructure.

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