Compass Explores Possibility Of Franchising, Company Says | Inman

CEO Robert Reffkin floated the idea of a franchise brand name in the course of an earnings simply call Tuesday, describing it as a “more profitable” method of escalating the small business.

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In a shock twist, Compass CEO Robert Reffkin unveiled Tuesday that his business is checking out the risk of franchising as it functions toward profitability.

Robert Reffkin

Reffkin manufactured the comments in the course of his company’s earnings contact. In a response to a issue from a Wall Road analyst, he explained that “franchising is certainly a additional lucrative way to develop.” While he claimed the business is discovering the alternative, he delivered number of specifics on how it may function — alternatively saying only that “we would not do that in a way that would impair the encounter for our current brokers in any way.”

“We would not franchise in the exact same geographies of our possess operations,” he included.

Reffkin also did not say when Compass might start franchising, or which marketplaces could be the initially to see these types of an option roll out.

Inman has attained out to Compass for a lot more aspects and will update this story with any details the corporation presents.

However, even with sparse specifics, the information is a important announcement. Given that its founding, Compass has managed to increase into the major firm of its form even even though protecting a centralized possession composition. At best, agents who wanted extra regulate could variety groups, but they could not truly personal their individual businesses in the exact same way a franchisee at another corporation may well.

Compass has also faced amplified opposition these days from corporations, these types of as Aspect which deliver again-office assist for agents who want to operate their possess models.

A Compass foray into franchising would upend the status quo, potentially enabling the firm to grow its model a lot more swiftly and nimbly. It would also make Compass glance extra like its more mature rivals companies, this sort of as RE/MAX and brands less than mother or father corporation Everywhere have long operated franchises.

Nevertheless a Compass franchise organization would be a big change for the brokerage, these a move isn’t without the need of precedent in the broader sector landscape. Back in 2020, for instance, Chicago-based mostly brokerage @homes released its individual franchise model. Nowadays, the business has franchises spread out across several U.S. areas.

California-dependent luxurious brokerage The Company also operates a franchise business.

No matter what occurs at Compass, the news of doable franchise functions arrives as the brokerage scrambles for profitability. Reffkin said all through Tuesday’s earnings contact that he expects to be no cost cash move good in the next quarter of 2023, and total for the yr, and that he is organized to do extra cost slicing if vital.

In full, Compass brought in $1.11 billion in profits and endured a internet loss of $158 million during the fourth quarter of 2022. Revenue was down calendar year over 12 months, but that loss was basically an advancement in contrast to the ultimate months of 2021.

Reffkin was finally upbeat about Compass’ prospects, but in his company’s earnings report also described 2022 as “one of the worst decades for the actual estate sector.”

Email Jim Dalrymple II