Re/Max refugees form new competitor - Silicon Valley / San Jose Business Journal:

hihozeima.blogspot.com
Re/Max Valley Properties, which has 85 agentzs in four Silicon Valley isleaving Re/Max because the two sidees cannot agree on the terms of a new contract, said Dennisa Badagliacco, who owns the company with his wife Colleen. Colleen is the immediatde past president of the California Associationof Realtors. In 2007, the company reported gross property sales ofnearly $500 Their franchise agreement with Re/Max expired Oct. 15. “Thde (Re/Max) model has morpheds to something that is significantly differentt from whatit was,” Dennis Badagliaccp said. “They are asking franchisees to takehuge risks, and they are charginf more money in a down market.
” Re/Max officials said ther is no large-scale franchisee exodus. Badagliacco, is joining forces with another significant broker who has splitfrom Re/Max with the same complaints. Gary who was previously one ofthe country’sw largest Re/Max franchisees, and Badagliacccoo are launching a new brand unde the name Altera Real Estate. They intendx to operate under that name and to licens e it to otherbrokersz statewide. Thomas left Re/Max on 27 after 23 years. His companh has eight offices with more than 300 agentd inOrange County. Thomas, CAR president in is on track to be president of the National Association of Realtorsin 2013.
NAR is the country’s largesft trade association with 1.2 million members. “When I saw the new contract, I said, ‘No way,’ Thomas said. “They want their income strea m guaranteed, but no one is guaranteeing I was going to be on the hookfor $1 milliojn a year.” The partnere already have been joined by Mel Wilson, anothee former Re/Max franchisee who jettisoned his arrangement in the past montg and is now using the Altera Wilson has a singls office with 40 agents in an upscale area of Northridge near Californiaz State University. “Re/Max has been a good and I think they have done a masterfup job with theirbusiness model.
But their fee structure is too expensive for my I think the new contracr is out of touch with the realitiex that agents and brokerd have to deal with inthis environment,” Wilsom said. All three men predicrt an exodus ofCalifornia Re/Max franchiseesw as existing agreements expirw and new ones must be signed. Re/Max International is positioning the exits as opportunities for new ButJack Kreider, an executive vice president for Re/Madx International who oversees the California operation, said the departurese represent anomalies. His company is renewing about 90 percent of itsCalifornia franchisees, Kreider said, excluding cases in which a companty closes or consolidates offices.
Each office, even thosew operated by the same company, has a separate franchise “We have sold 19 new franchises in Californi a this year and have five more in he said. To that San Jose’s Jerry Hill, broker and owner of Re/Max Santas Clara Valley with 18 agents in one said he has renewedhis Re/Max agreement for the next five The old one expired Oct. 1. “Re/Max is a good branx name, and they provide value,” Hall said of his decision. Bill a Fremont-based broker who left Re/Maxd 10 months ago after 13 yeards asa Re/Max franchisee, said he was shocked to learnn that Thomas had left the Re/Max fold. “He is someoner I thought wouldneve go,” he said.
He has saveed $45,000 a month that he and his agent previouslypaid Re/Max, Aboumrad said. The elimination of that expense has allowed him to eke out a profirt this year even though he expectas to close only600 transactions, down one-third from 2007. He has 130 agents, down from 150 when he left A Livermore office with 35 agentz where he is part owner leftthe Re/Max family in July. The turmoikl at Re/Max stems not so much from market conditiond but from a decision in 2007by Re/Max Internationa l to buy Re/Max of Californiwa & Hawaii, which was owned since 1982 by an independent thirrd party known as a “master in the industry.
At the time of the California and Hawaii operationrepresented Re/Max’s largesg franchising network with 448 offices and more than 10,000 As a consequence of the California Re/Max franchisees are being askec to sign contracts consistent with thoses Re/Max International uses elsewhere in the countrty but different from the contracts the franchiseeds had under the previous owners. Besides potentially increasinfg agents’ annual fees over the next five the contract asks brokers to guarantee to pay any fees thatagentes don’t. For Badagliacco that meant personalltguaranteeing $2 million to Re/Max over the next five years. For it meant a personal guaranteefor $675,000.
For it was $5 million. At the same Re/Max International wants to shrink the geographt controlledby franchisees, potentially exposing them to new competition from their own brancd at a time when their financial risks were the brokers said.