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Compass Explores Possibility Of Franchising, Company Says | Inman

CEO Robert Reffkin floated the concept 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 opportunity 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 Road analyst, he mentioned that “franchising is certainly 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 might not do this in a approach that will 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 may start franchising, or which markets may very well 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 data the corporate offers.

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

Compass has additionally confronted elevated competitors these days from firms, equivalent to Aspect which give 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 increase its model extra shortly and nimbly. It could additionally make Compass look extra like its older rivals; companies, equivalent to RE/MAX and types below guardian firm Anyplace have lengthy operated franchises.

Although a Compass franchise enterprise can be a significant 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 doable franchise operations comes because the brokerage scrambles for profitability. Reffkin mentioned throughout Tuesday’s earnings name that he expects to be free money movement constructive within the second quarter of 2023, and general for the 12 months, and that he’s ready to do extra value reducing if obligatory.

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 12 months over 12 months, 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.”

E-mail Jim Dalrymple II