- Company: RealNet
- Player: Jan Davel, MD
- Visit: www.realnet.co.za
What are the costs?
- Set up costs: Fees range from R150 000 to R800 000, depending on the franchisee’s requirements. This includes a joining fee, a marketing pack, training, systems and ability to leverage the RealNet brand.
- Monthly fees: From R2 075 to R6 910, plus a success-based 5% royalty on gross commission.
Becoming a franchisee
- Prospective franchisees need to be qualified estate agents or principals with a minimum of three years’ industry experience, as well as operate an established and reputable name with a 5% market share in their territory.
- An ideal franchisee has high levels of professionalism, sound business ethics, and is an energetic, goal-oriented go-getter. With the support of the franchisor, it’s possible to achieve a 10% market share in your territory, so these characteristics, and a receptive attitude, are important.
RealNet was founded in Pretoria in 1996, and since franchising in 2001, has grown to be one of South Africa’s best known real estate brands – 61 units strong nationwide. MD Jan Davel was appointed in 2010 to steer the brand through the industry changes while shaping RealNet into a brand of significant value to prospective franchisees.
The South African real estate industry has had a bad reputation for years. The low barriers to entry meant just about anyone could become an estate agent and capitalise on the property boom of the mid 2000s, exposing consumers to risk and damaging the industry’s image. Then along came the National Credit Act that put a damper on getting loans.
Many estate agents who relied on success-based commissions simply went out of business. But like a veld fire, the significant exodus has given the property industry a chance to clean up its act, including the introduction of far more stringent qualification criteria for practising estate agents.
Once again, the property industry is looking like a good place to be. But with the impact of the Consumer Protection Act (CPA) that came into effect in April 2009, and the imminent Property Practitioner’s Act which incorporates Code of Good Practice, RealNet Holding’s MD Jan Davel explains why it’s more important than ever for independent estate agencies to partner with an experienced, skilled and reputable brand.
How have the changes of recent years affected the property industry?
There have been three major changes that have had an impact on the real estate industry. The National Credit Act that came into effect in June 2007 had a big impact by driving many smaller and fly-by-night operators out of business.
Then the CPA created consumers who (in theory) became some of the most protected in the world. The impact on the franchise industry was that each franchisee effectively became a consumer and the franchisor a supplier in terms of the CPA. Each mandate accepted by the estate agent also gives rise to the agent becoming a supplier to the purchaser and/or the seller (depending on the circumstances).
For the uninformed or unskilled estate agent, having to deal with many legal principles and formal written contracts can put all parties involved at significant risk of utilising documents that aren’t CPA compliant.
But the move that’s had the biggest impact on the industry has been the introduction of much higher qualifying criteria to eliminate unqualified and unscrupulous practitioners. These include FET Certificate level 4, and professional designation exams.
What are the future challenges facing the real estate industry?
The current legislation that governs the real estate industry (The Estate Agency Affairs Act 112 of 1976) is very outdated for today’s market conditions. In an attempt to bring it up to date, the first draft of the new Act (The Property Practitioner’s Bill) was judged to be unconstitutional with far-reaching consequences for the industry if implemented.
Having been sent back to the drafting board, it’s expected that the new Bill will be published in the first quarter of this year and that the Code of Good Practice will be incorporated into the new Act. This means that BEE and gender targets will be part and parcel of the new legislation.
We also believe that technology developments in the next five years will introduce significant challenges and opportunities for the industry. Tech developments include websites, property portals, apps, mobile sites and desktop valuations. These are alien to many of the more mature estate agents, making it difficult for them to compete with younger, more dynamic professionals.
To add to the increasing complexity, South Africa is experiencing a new brand of consumerism. Fuelled by growing access to the Internet and social media, consumers are highly informed, price conscious and rights savvy. This means continued research and holistic understanding of consumer affordability, lifestyle, safety, status, return on investment, migration patterns, retirement and estate planning, is essential.
What does RealNet Holdings offer prospective franchisees?
The present and future real estate industry requires knowledge and skills in several related disciplines, such as the legal, financial and marketing sectors. This necessitates strategic thinking, careful observation, exceptional business planning and relentless implementation.
One has to ask whether the average independent real estate business owner has the ability and the capacity to continually gather information, and keep an eye on trends, competitor intentions, human resources, corporate governance, risk and compliance, and related issues. This can be daunting and time consuming, and what’s more, these are not the most critical business drivers.
RealNet Holdings is committed to our franchises through proper disclosure, continued transparency, insight into tried and tested business practices, know-how, efficient systems and tailor-made IT solutions, as well as standard operating procedures, continuous training and development and marketing support. Staying abreast of research, new technology, changes in legislation and regulation, social media marketing trends and so on, is where we play a significant role.
An experienced franchisor like ourselves will consider factors like geographic features, demographics, psychographics, socio-cultural variables, use-related data, brand awareness, brand loyalty, convenience and security.
By allowing the business owner to concentrate on the opportunities available and thereby increasing sales without necessarily increasing overhead costs, the implementation of a tailor-made South African franchise solution can result in a substantial competitive advantage.
At RealNet we focus solely on being a franchisor that is able to formalise different models to cater for different franchisee scenarios, and keep an eye on trends, legislative changes and all the other important aspects that an independent business owner will battle to keep abreast of.
How can prospective franchisees benefit from joining RealNet?
- We focus our attention on developing service level agreements with a variety of service providers so that our franchisees have access to the best available technology with the requisite training to master it.
- RealNet’s board of directors and senior management team are highly experienced and qualified in our respective fields. As an example I’m an experienced commercial attorney who specialised in franchising and banking law.
- We look to customise solutions for existing businesses rather than forcing a ‘business in a box’ on successful applicants. We work with each franchisee’s unique qualities, plans and circumstances.
- We are very selective when choosing franchisees which helps protect and strengthen the brand’s reputation.
- We help franchisees achieve compliance through our own expertise as well as engaging them in continuous professional development.
Who is your ideal franchisee?
We’re not looking for anyone who can be trained into the system. We’re very much in favour of converting the real estate industry into a truly professional one, so our ideal franchisee is already qualified and experienced and operating their own agency.
They’ve come to realise that their business can benefit significantly from being under a branded network like RealNet which is able to provide them with solutions to existing problems and future challenges.
RealNet’s three franchise models
We embrace diversity and offer different models to accommodate and provide solutions across the whole market spectrum.
- A full franchise is typically for qualifying investors who want to own and manage a relatively big estate agency, but don’t necessarily want to be an estate agent themselves.
- A mini franchise is designed for owner-operators who would have a smaller infrastructure, with four to eight agents working in a smaller geographical territory who often participate as estate agents themselves.
- Then there’s the boutique agency for smaller, niche operations – typically in a lifestyle estate or a smaller town with limited opportunities.
What will RealNet be taking advantage of in the years to come?
There is a push by many franchise brands across a range of sectors to venture into Africa. Because real estate is not a generic service and each country has its own legislation and regulations, and very few African countries are in a position to enjoy a property boom, we’re focusing our attention squarely on the country that we’re experts on – South Africa.
This means we’re able to offer solutions for, and benefit from, South African challenges that include, amongst other things, shortages of housing, a lack of skills development, transformation and significant unemployment problems.