The name is the game

Posted On Thursday, 15 August 2002 02:00 Published by eProp Commercial Property News
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The entrepreneurial spirit comes in to play in the sale of residential property

John HerbstFranchising in the residential real estate industry, though not new, has recently blossomed. An increasing number of agents clearly want to have more control over their income. Franchising may also provide black entrepreneurs with opportunities in the townships.

'Agents are driven by the prospect of owning their own companies,' says Debbie de Bruyn, franchise sale & support manager at Realty Executives. And this is an opportunity to get into the industry on the back of a reputable brand. 'Consumers tend to be brand-conscious and have high expectations of service levels,' says John Herbst, CEO of Aida National Franchises, one of the oldest franchisers.

Denese Zaslansky started a franchise in 1997 and has not looked back. 'Franchising gives you access to shared ideas, but the responsibility for execution lies with the individual. When you're on your own, you don't have access to marketing trends and business referrals,' she says.

Franchisers can use the model to expand into new areas. This has happened in the townships, where the secondary market is estimated at 7m home owners. 'There is enormous potential for business in the townships as residents become upwardly mobile,' says Herbst. 'The industry should help potential franchisees.'

But the township market requires guidance. 'Sellers have a tendency to put a house on the market and withdraw it a few weeks later,' says Hilda Sithole, who has been working in Soweto for the past three years.

The biggest problem is that most banks will advance only 90% bonds on township properties. 'Most buyers are unable to afford the 10% upfront cost,' says Sithole.

But Sithole would not consider starting her own business. 'Buyers and sellers want to know that they will be getting a similar service to that offered in mainstream areas. A franchise is able to offer this.'

Sithole hopes that township estate agents will eventually form a united body.

In property franchising, the commission is shared either on a 50-50 basis or on a sliding scale that gives the franchisee up to 90%. In common with other kinds of franchise operations, property franchisees pay a one-off start-up capital cost. A percentage of gross income goes to a marketing fund and there is a monthly service fee.

Herbst advises prospective franchisees to budget for three months of running capital. Commission is paid out only after the bond is registered, which is usually after three months.


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