Hi,

I just purchased a franchise and I'm working on compensation plans for agents. Here is what I'm thinking of:

200/month(our company provides database, website, email, and monthly newsletter automatically sent to clients in their database)

3% franchise fee on each transaction off the top

80/20 split

~21K cap not including the 3% franchise fee--ex: if agent did an additional million in production after cap(around 2.5M), that would add an extra $900 cost to the agent(the franchise fee)

$50 E & O per transaction.

Any thoughts will be appreciated.

Thanks,

What is the franchise?.. and what is the average selling price in your area? because that will have alot to do with your compensation model.

Real Living--a quality, high end franchise with a strong brand, lots of technology, and a long history dating back to 1956. The founder is a past president of NAR.

Our market has homes priced from about 100K up to Million+ properties--we are in an area of about 1.3M population. The cities average selling prices is about 165K but the area that the office is in--the average will probably be above 225K.

I'm also going to add a recruiting bonus in to the total compensation plan. I'm really don't like the 7 level deep plans. Some of the other RL's do a one level deep, the agents get the money immediately and the agents invest it into an individual account so they watch the money grow and it is under the agents control--I've done numbers doing it this way and its astounding how much someone will accumulate over a few years. My husband and I are huge advocates of time value of money having invested a lot of money from our early twenties until now(into our 40's)--it has made a very large difference in our lives--I think someone once said that compounding interest is the biggest miracle of all time! I think it will be very motivating for an agent to watch their retirement grow. I also think that it will encourage people to mentor directly the person they brought in. From the agents standpoint, I think that it would be more appealing to have the money at the time it is earned and not have to wait for it to go thru corporate, be profit shared, etc, etc,---I, myself, always think a bird in hand is worth more than two in the bush!

Anyway--thoughts??

glitxchic,

I sent you a PM in followup... please check your mail. Thanks

It sounds like a lot of fees, but that's only because of the franchise fee. It seems competitive. I'd want to see some scenarios that outline a bottom line cost since I'm a bottom line thinker.

At KW in Austin, I only remember the main fee...18k per year. Our website and email is $50-55/mo with free listings in Premier Magazine. E&O is $80, so yours is less. I'm not into recruiting, so wouldn't compare it.

My only concern is that RealLiving targets residential properties and women. For those of us who want to do commercial or work with investors, it seems like we don't have a true fit. Other than that, it's a great franchise and will do well.

Dee,

The franchise fee and the monthly fee that is paid goes towards the cap so overall we are trying to make it fair for both the agent and the brokerage. If we structure the fees in this way, we will be able to get a good mix of experienced and new agents and be able to manage our cash flow better. Also, having the $200 monthly fee will also weed out agents who don't have the capital to really be in business. The only downfall to this is that we may miss some agents who will be great but don't have the capital to be in business. We may do a 75/25 split so that agents cap quicker and are looking at bringing that cap down a little if we can because as you know in Austin we are in KW territory although I know that the tools that RL offer are definitely worth the extra money that is in that 21K.

As far as the recruiting goes, we really don't want that to be our main focus as we want the company to be the place that agents "want to work at" in the long run. In the short run, however, we need to get agents in the door, the systems set up, training going, and the kinks worked out. After looking at all the other companies out there and their recruiting plans--I really think that agents who do bring in other quality agents should be compensated quickly and directly. I also think that agents should have access to great financial planners so that they can invest that money and be in control of it if they choose to go that route to build a nest egg.

Real Living does target women in its branding, website presence and such because historically women have been shown to be the ultimate decision makers. RL's presence in their branding is upbeat, modern and targets the way people live today-- the baby boomers are living longer and expect more as they age and there are significant numbers of Gen X buyers and sellers coming on board. I don't think they exclude men or anything they just have created a brand that really appeals to women.

We do not have any limitations as to agents doing commercial real estate or working with investors--in fact I would encourage it. The franchisor only stipulates that the commercial side of the franchise cannot be the primary focus of the business--in other words they don't want to sell a franchise area to someone whose main focus is commercial real estate only.

Hope this answers some of your questions-

Thank you so much for your input as it is very important to me.