Business models / Commercial Real Estate Brokerage / Own a franchise

A commercial real estate brokerage franchise, or your own?

One franchise brand runs a commercial real estate brokerage. Here it is beside the independent version of the same business, with its fees as the brand publishes them and worked out in dollars. A brand can bring customers an independent has to earn one by one. The question is whether it brings in more than it costs.

Typical for a commercial real estate brokerage: $500k to $5M in sales, and the owner keeps 7% to 9% after paying for its own marketing. Change either to your own numbers.

How the two sides are counted

  • Sales. A brand’s name brings customers an independent wins one at a time, so each brand is worked out at the sales it reports where we have them, and at yours where we don’t.
  • Marketing. On your own you pay for all of it, about 4% of sales here. The ad fund does part of that job, so it is counted once, not twice.
  • Survival. New franchised businesses were about 5 to 6 points more likely to make it through their first two years in Census data, and about half of all new businesses close within five years. It is not in the dollars; each brand’s details give the sources.

Your own commercial real estate brokerage and each brand, side by side

The independent version

Your own commercial real estate brokerage

Built and run under your own name

Cost to open
$92k to $297k
Annual sales
$1.6Mtypical
Franchise fee
None
Royalty + ad fund
Noneall marketing is yours
$126,400
The owner keeps in a year, after about $63k of marketing
Taking new owners

Coldwell Banker Commercial

Commercial real estate brokerage

Total investment
$37k to $742k
Avg. annual sales
Ask the brand
Franchise fee
Not listed
Royalty + ad fund
5.5% then 3% + 2%
$54k
The owner keeps in a year at $1.6M in sales (your sales), after $104k to the brand
$72k less a year than on your own

Before you sign: what to read in the disclosure document

Every franchisor must give you its Franchise Disclosure Document at least 14 days before you sign or pay. These are the parts that answer the questions above.

  • Items 5 to 7, the fees and the investment. The franchise fee, every other fee (technology, training, transfer, renewal), and the full opening budget, including working capital.
  • Item 19, what owners earn. Whether the brand states owner sales or earnings at all, and for which units. Put its figures in the boxes above in place of the typical ones.
  • Item 20, units opened, closed and sold. How many owners left in each of the last three years, and a list of current and former owners you can call.
  • Item 12, the territory. Whether you get a protected area, and what the brand can open or sell inside it.
  • Item 21, the franchisor’s own finances. Whether the company behind the brand is in good health.

smbnest is a self-assessment tool, not individualized advice. Fees are as each brand publishes them on its franchising page and in its disclosure document, reviewed in the month shown, and change; the figures in dollars are worked out at the sales you enter and are not a forecast. We never take a cut of your deal or a fee from a franchisor. Before you sign, speak with a franchise attorney and a qualified financial adviser, and call owners from the disclosure document.