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Compass Explores Possibility Of Franchising, Company Says | Inman

CEO Robert Reffkin floated the thought of a franchise model throughout an earnings name Tuesday, describing it as a “extra worthwhile” technique 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 for 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 technique to develop.” Although he mentioned the corporate is exploring the choice, he offered few particulars on the way it would possibly work — as an alternative saying solely that “we’d not do this in a method that might impair the expertise for our present brokers in any method.”

“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 possibility roll out.

Inman has reached out to Compass for extra particulars and can replace this story with any info the corporate offers.

Nonetheless, even with sparse particulars, the information is a serious announcement. Since its founding, Compass has managed to develop into the most important firm of its form even whereas sustaining a centralized possession construction. At finest, brokers who needed extra management may kind groups, however they couldn’t really personal their very own companies in the identical method a franchisee at one other firm would possibly.

Compass has additionally confronted elevated competitors these days from firms, resembling Aspect which offer back-office assist for brokers who wish to function their very own manufacturers.

A Compass foray into franchising would upend the established order, doubtlessly permitting the corporate to increase its model extra shortly and nimbly. It could additionally make Compass look extra like its older rivals; companies, resembling RE/MAX and types beneath mum or dad firm Anyplace 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, as an illustration, Chicago-based brokerage @properties launched its personal franchise model. Right now, 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 attainable franchise operations comes because the brokerage scrambles for profitability. Reffkin mentioned throughout Tuesday’s earnings name that he expects to be free money move constructive within the second quarter of 2023, and total for the yr, and that he’s ready to do extra price slicing if crucial.

In complete, Compass introduced in $1.11 billion in income and suffered a web lack of $158 million throughout 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 finally upbeat about Compass’ prospects, however in his firm’s earnings report additionally described 2022 as “one of many worst years for the actual property market.”

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