CEO Robert Reffkin floated the thought of a franchise model throughout an earnings name Tuesday, describing it as a “extra worthwhile” methodology of rising the enterprise.
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In a shock twist, Compass CEO Robert Reffkin revealed Tuesday that his firm is exploring the potential of franchising as it really works towards profitability.
Robert Reffkin
Reffkin made the feedback throughout his firm’s earnings name. In a response to a query from a Wall Avenue analyst, he mentioned that “franchising is certainly a extra worthwhile strategy to develop.” Although he mentioned the corporate is exploring the choice, he supplied few particulars on the way it would possibly work — as a substitute saying solely that “we might not do this in a approach that might impair the expertise for our present brokers in any approach.”
“We’d not franchise inside the identical geographies of our personal operations,” he added.
Reffkin additionally didn’t say when Compass would possibly start franchising, or which markets might be the primary to see such an choice roll out.
Inman has reached out to Compass for extra particulars and can replace this story with any info the corporate supplies.
Nonetheless, even with sparse particulars, the information is a serious announcement. Since its founding, Compass has managed to develop into the biggest firm of its type even whereas sustaining a centralized possession construction. At greatest, brokers who needed extra management may type groups, however they couldn’t really personal their very own companies in the identical approach a franchisee at one other firm would possibly.
Compass has additionally confronted elevated competitors recently from corporations, comparable to Aspect which give back-office assist for brokers who wish to function their very own manufacturers.
A Compass foray into franchising would upend the established order, probably permitting the corporate to broaden its model extra shortly and nimbly. It will additionally make Compass look extra like its older rivals; corporations, comparable to RE/MAX and types beneath father or mother firm Wherever have lengthy operated franchises.
Although a Compass franchise enterprise could be a serious shift for the brokerage, such a transfer isn’t with out precedent within the broader business panorama. Again in 2020, for example, Chicago-based brokerage @properties launched its personal franchise model. At the moment, the agency has franchises unfold out throughout a number of U.S. areas.
California-based luxurious brokerage The Company additionally runs a franchise enterprise.
No matter occurs at Compass, the information of potential franchise operations comes because the brokerage scrambles for profitability. Reffkin mentioned throughout Tuesday’s earnings name that he expects to be free money circulation constructive within the second quarter of 2023, and total for the yr, and that he’s ready to do extra value reducing if mandatory.
In whole, Compass introduced in $1.11 billion in income and suffered a web lack of $158 million through the fourth quarter of 2022. Income was down yr over yr, however that loss was really an enchancment in comparison with the ultimate months of 2021.
Reffkin was in the end upbeat about Compass’ prospects, however in his firm’s earnings report additionally described 2022 as “one of many worst years for the true property market.”
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