T3 Sixty has ranked the nation’s largest brokerages every year since 2018, but has not chosen to identify “independent brokerages” – brokerages with no franchise brand affiliation -- in its ranking or consider them separately for its industry research and analysis.
While T3 studies franchisors and franchise brands, it does not evaluate brokerages by franchise affiliation in the Real Estate Almanac because the definition of “independent brokerage” suggests a more important distinction between firms affiliated with a franchise brand and those without.
In fact, brokerage success has many fundamental elements that contribute to a firm’s success in a much larger degree, led by the diligence and smarts of its leadership group, which dictate its financial discipline, its ability to measure and adjust to the market swiftly, to keep staff and agents accountable, to implement and roll out technology efficiently and more.
This article dives into the reasons T3 Sixty does not use franchise affiliation as a primary lens to evaluate brokerages and why it believes the industry should drop the category in brokerage rankings.
The idea of an independent brokerage essentially centers on identifying a firm that operates outside of a franchise network and without the aid of branding. These firms have more freedom and flexibility in how they market and operate without having to adhere to franchise brand guidelines.
However, franchising has little bearing on operations of the brokerages who affiliate with a brand. Solid, steady leadership, disciplined operations and smart, careful decisions primarily dictate brokerage success, not franchise affiliation. Franchised brokerages like unfranchised brokers are independently owned and operated. Their success – that for any broker – relies on the business savvy, discipline and execution of its leadership. That has far more to do with a brokerage firm’s success than being a part of a franchise system.
Many nonfranchised brokerages, especially the larger ones, hold membership in networks such as Leading Real Estate Companies of the World (LeadingRE) and The Realty Alliance who provide members many of the resources that franchise brands provide their affiliates, such as networking, masterminding, referrals, services and technologies with economies-of-scale pricing and branding but do not have agreements governed by the U.S. Franchise Rule.
These memberships typically come with less branding and business model rules that franchisors apply to their franchisees, but they provide many of the same support in brand and networking.
Rise of national brokerage brands
In the 1970s when real estate franchising emerged with powerhouse brands RE/MAX, Century 21 Real Estate and ERA Real Estate, the endeavor offered smaller brokerages a national brokerage brand to leverage in their local market. There were no brokerages with a national scope at the time, thus these franchise brands grew into the available whitespace.
Companies now operate brokerage operations at national scale are proliferating; this was rare a decade ago, but now there are large operations among the largest in the industry on the Mega 1000 Ranking list. EXp Realty, Redfin and Compass are prominent examples. Note that all of these companies are also public.
Aside from the arbitrary meaning of the distinction explored above, analyzing the industry makes clear that identifying “independent brokerages” is impossible to do clearly or consistently.
For example, an increasing number of real estate companies operate either national brokerage companies or franchise brands, or do both. T3 Sixty refers to these large holding companies as enterprises, and ranks them by sales volume, transaction sides and agent count every year in the Corporations section of the Real Estate Almanac.
Parsing these enterprises poses challenges for the independent brokerage definition and comparison.
For example, the enterprise Anywhere Real Estate owns the nation’s second largest brokerage in Anywhere Advisors, and operates six franchise brands: Coldwell Banker, Sotheby’s International Realty, Century 21, Better Homes and Garden Real Estate, ERA Real Estate and Corcoran Group. All offices within Anywhere Advisors are affiliated with one of three Realogy-owned brands – Coldwell Banker, Sotheby’s International Realty and Corcoran Group.
However, Anywhere Advisors, itself, is not affiliated with a franchise brand. Is it an independent brokerage? Why or why not?
Same question holds for other enterprises with similar holdings, such as HomeServices of America, Howard Hanna (which franchises its brand in certain regions) and At World Properties.
In doing away with independent brokerage categorization, and identifying some more useful ones, the industry will facilitate more productive analysis, better understanding and a more vibrant future. In fact, it suggests a meaningful distinction that, in fact, confuses analysis and hampers understanding.