Recruiting Model

Realizing how important recruiting was to the growth and profitability of a brokerage, some entrepreneurial brokers developed the recruiting model, which compensates agents and brokers for recruiting additional agents into

Tales from the Real World


John was a manager for a major franchise. As a reward for John's recruiting efforts, the master franchisee gave John an opportunity to acquire a troubled franchise office in an upper-end marketplace. The broker did not charge John an initial franchise fee, since the franchise fee had already been previously paid by the master franchisee.

John was given disclosure documents, which he reviewed carefully for any potential references that might affect his ability to grow his new company into a multioffice organization. John discovered no such limitations and further noted that there were no other franchise offices in the immediate surrounding towns. John was excited by the opportunity to carry the franchise brand into untapped neighboring marketplaces.

John set out to recruit agents into his new office. Within 90 days, John had reenergized the office, recruited additional agents, and found a high-end boutique firm to acquire. John worked out the details of this potential acquisition with the owner and brought his plan to the master franchisee, seeking franchise approval of this new office addition to the system.

John's excitement was soon diminished when the master franchisee would not approve of the acquisition because the boutique office was in a town that the master franchisee wanted to retain for itself. This information had never been disclosed to John. John hired an attorney and began a battle with both the master franchisee and the franchisor, claiming failure to adequately disclose and explain the franchise growth restrictions, especially given the fact that John had expressed interest in growing into a multioffice organization.

It was discovered that the master franchisee had neglected to provide John with the list of zip codes and towns that were reserved for the master franchisee's expansion exclusively. Disillusioned with the entire experience, John no longer wished to be a part of the franchise and agreed to settle his claim by simply unwinding the franchise purchase agreement. John soon went to work for a competing company.

the franchise. Two major franchises that work with this model are Avalar Real Estate and Keller Williams Realty.

The basic concept is that a reward is offered for recruiting agents into the company. Once an agent or broker has been recruited into a franchise office, a certain percentage of the franchise fee paid from that new recruit's gross production is ultimately returned to the agent or broker responsible for recruiting that agent. The financial incentive for recruiting another agent typically ranges from 0.5 to 1.2 percent of the gross commission income generated by that new agent. In the case of Keller Williams Realty, an additional small recruiting bonus is paid on the proportionate percentage of the profits generated by any agent recruited. Furthermore, in the recruiting model franchise, a broker can also collect bonuses for additional agents that are recruited by the new recruits, similar to a multilevel marketing concept, potentially creating a passive "down line" revenue stream from agents recruited, then from other agents recruited by those agents.

The benefit of a recruiting model franchise is that it creates financial incentive for recruiting and encourages agents to proactively recruit on the broker's behalf. This sort of motivation can help a small office experience explosive growth.

The downside of a recruiting model franchise is that it often attracts agents that may be more interested in recruiting and creating a "down line" revenue stream than they are in listing and selling real estate. A broker may want to think carefully about hiring an agent who wants to join the company simply because of the recruiting incentive; this may be a clue that the agent may not be a very solid sales producer. If an office becomes filled with agents who are mediocre producers, trying to recruit better agents will be difficult. Depending upon the franchisor, the recruiting model franchise may in fact become a retirement model for an agent or broker.

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