Corcoran is going the franchise route. Here’s what it’s up against.

Skeptics wonder about referral business, high level of competition

TRD NATIONAL /
Nov.November 01, 2018 07:00 AM

Pam Liebman (Composite by Kerry Barger for The Real Deal)

Four decades after Barbara Corcoran launched her eponymous brokerage, the firm is again banking on the Corcoran name.

Last week, parent company Realogy Holdings said it plans to franchise the Corcoran brand in “global mega-cities” and leisure markets in a bid to attract independent firms and boost its overall market share.

But the New York-based firm will be competing with some of the largest franchises in the business — including Keller Williams and Berkshire Hathaway, not to mention Realogy’s existing franchises, which include Coldwell Banker, ERA Real Estate, Better Homes and Gardens, Century 21 and Sotheby’s International Realty.

The move also comes at a time when brokerage margins are being squeezed and growth among major franchise brands has stagnated, according to Steve Murray, founder of Denver-based consulting firm Real Trends.

For the past decade, the major firms have accounted for 42 to 43 percent of the market. But Murray said Realogy is probably eyeing niche-oriented franchises. (In addition to franchising Corcoran, which focuses on high-end markets and racked up $21 billion in sales last year, Realogy said it plans to franchise Climb, a San Francisco-based mobile-oriented firm.)

“We’re going to see a lot more segmentation of the market,” Murray said, “and I think Corcoran and Climb will be two completely distinct offerings and they will appeal to a different broker audience.”

Currently, the largest franchise brokerage in the U.S. is Austin, Texas-based Keller Williams, which has more than 149,000 agents across the U.S., according to Realtor magazine’s biennial franchise report, published last year. Behind it is Coldwell Banker with 89,000 agents and brokers, followed by RE/MAX with about 62,000 and Century 21 with 55,000.

Although Corcoran still hasn’t filed a franchise disclosure form — which will detail the cost to franchise — there’s a wide range of fees among the major players.

Realogy’s franchise division ERA, which counts more than 16,000 agents and 500-plus offices, charges each franchisor an initial $25,000, as does Warren Buffett’s Berkshire Hathaway HomeServices of America. Keller Williams has an initial fee of $35,000 (plus royalty, tech, marketing and education fees), while Massachusetts-based Exit Realty, which has 25,000 agents, charges an initial $7,500 for rural offices and $32,000 for urban locations.

Last week, Corcoran CEO Pam Liebman said she’d received several inquiries within 24 hours after announcing the news. But it’s unclear how much Corcoran affiliates will compete with the firm’s owned offices. And in an industry that prizes referral business, not everyone believes the model pays. “I don’t think the franchise model works when it comes to referrals,” said Howard Lorber, chairman of Douglas Elliman, speaking at The Real Deal’s annual showcase in Miami last week.

Sotheby’s COO Julie Leonhardt LaTorre, who was also at TRD’s forum, acknowledged that franchises do “bump up against each other.”

“They do compete in certain markets, just like agents within their own agency are likely competing with each other for the same listing,” she said.

But she said Sotheby’s affiliates have referred $1.4 billion worth of business to each other last year, out of $108 billion in total sales. Sotheby’s isn’t in it for pure market share, either. “We’re not out there to have the most agents, but to have the right agents.”

Corcoran is likely to take a similar approach, particularly because Liebman will oversee the franchises, in addition to Corcoran’s 33 company-owned offices and 2,300 agents.

“I will be very selective about who we bring in,” Liebman said at TRD’s Miami event. But she conceded that splits are not within her purview. “They can maintain whatever split levels they like; I would never dictate what different markets should be doing,” she said.

Samuel Mizrahi, whose family owns Century 21 Mizrahi Real Estate in Brooklyn, isn’t particularly worried that Corcoran will edge him out.

“Competition is heavy,” he acknowledged. But there’s value in being part of a larger franchise network, he said. “We collaborate a lot and it’s easier when we have a sister company.”


Related Articles

arrow_forward_ios
Pam Liebman (Illustration by Paul Kisselev)

Pam Liebman’s lifeguarding days

Pam Liebman’s lifeguarding days
49 East 10th Street and Barbara Corcoran (Credit: Google Maps and Getty Images)

Corcoran to shut down office in building partly owned by Barbara Corcoran

Corcoran to shut down office in building partly owned by Barbara Corcoran
Corcoran President & CEO Pamela Liebman (Credit: Corcoran, Getty Images)

Welcome to Queens: Corcoran opens first borough outpost

Welcome to Queens: Corcoran opens first borough outpost
421 Broome Street (Google Maps)

Soho penthouse buy sets record despite price chop

Soho penthouse buy sets record despite price chop
Oxford Property Group CEO Adam Mahfouda and (inset) the late Bianka Yankov (Mahfouda courtesy of Propco Holdings, iStock, Linkedin)

Oxford Property Group acquires Spire, expands to nearly 800 agents

Oxford Property Group acquires Spire, expands to nearly 800 agents
Brooklyn’s Sunset Park is in the midst of a severe housing crisis and in desperate need of affordable housing. (Photo by Jim.henderson via Wikipedia)

Sunset Park faces severe affordable housing shortage: report

Sunset Park faces severe affordable housing shortage: report
209 Dean Street and 315 Adelphi Street (Google Maps)

Sprawling Brooklyn townhouses drive week’s priciest deals

Sprawling Brooklyn townhouses drive week’s priciest deals
The number of single-family homes on the market hit historic lows in July, driving prices up (iStock)

US housing supply reaches nearly 40-year low

US housing supply reaches nearly 40-year low
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...