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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 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 unquestionably a extra worthwhile option to develop.” Although he mentioned the corporate is exploring the choice, he supplied few particulars on the way it may work — as a substitute saying solely that “we’d not do this in a manner that might impair the expertise for our current brokers in any manner.”

“We’d not franchise inside the identical geographies of our personal operations,” he added.

Reffkin additionally didn’t say when Compass may 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 data the corporate supplies.

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 greatest, brokers who wished extra management might kind groups, however they couldn’t truly personal their very own companies in the identical manner a franchisee at one other firm may.

Compass has additionally confronted elevated competitors currently from firms, akin to Aspect which offer back-office help for brokers who need to function their very own manufacturers.

A Compass foray into franchising would upend the established order, doubtlessly permitting the corporate to broaden its model extra rapidly and nimbly. It could additionally make Compass look extra like its older rivals; companies, akin to 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, for example, Chicago-based brokerage @properties launched its personal franchise model. As we speak, 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 doable franchise operations comes because the brokerage scrambles for profitability. Reffkin mentioned throughout Tuesday’s earnings name that he expects to be free money circulate constructive within the second quarter of 2023, and general for the 12 months, and that he’s ready to do extra price reducing if obligatory.

In complete, Compass introduced in $1.11 billion in income and suffered a internet lack of $158 million throughout the fourth quarter of 2022. Income was down 12 months over 12 months, however that loss was truly 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 true property market.”

E-mail Jim Dalrymple II