Australian Real Estate Agency Design: Strategies for the Franchising Business Model
Much of the research conducted to date concentrates on intrinsic benefits of franchising, and researchers adopt a pragmatic lens to explain the franchising phenomenon from a particular perspective, which is generally a favourable one and concerns more pragmatic issues such as encroachment, location and franchise fee policies, or more theoretical discourse on transaction cost analysis, and ownership direction.
It is largely for this reason that this study’s focus is on uncovering the basis of franchising strategy beyond its pragmatic layer. The study is directed towards an operational analysis of different real estate business models, including franchised and non-franchised, from a purely organisational perspective. As such, it is envisaged that the research will expose prevalent key themes and factors underpinning the strategic choices of business modelling within the Australian real estate industry sector.
Furthermore, undertaking this study will furnish the scarce body of literature with explanations of the growing trend towards more unconventional types of business models emerging within the Australian real estate industry sector and the challenges they pose to the franchise business model as having a boundless future, as well as the concept of franchising as being boundary-less.
Franchising is one of the most popular business strategies adopted by entrepreneurs worldwide. In business format franchising, which is applicable to the services based industries such as real estate, the method is augmented to include business systems as well as trademark and brand. Franchising’s snug fit with a services based industry such as real estate can be attributed to two important factors.
First, franchising encourages an emphasis on provision of “diverging scales of operation between the production of goods and services and development of a business goodwill attached to it” (Anderson et al. 1998; Caves & Murphy 1976). This concept extends to the real estate industry as a service based industry structured on the basis of the existence of a high concentration of independently owned and mostly locally operated companies.
Second, its successful association with the real estate industry is largely due to the value placed on relationships, trust, and commitment factors. As real estate professionals constantly strive to build strong and enduring relationships with their customers, so franchising is most importantly based on valuing the strength and effectiveness of the franchisor and franchisee relationship.
Thus, the rationale behind this study is based on the pretext that franchising provides the real estate industry stakeholders with an attractive business operating system that has been proven to work successfully within other industry sectors. Furthermore, the industry statistics to date show franchised organisations’ dominance in the industry over the non-franchised organisations, which is indicative of the successful uptake within the Australian real estate industry context.
It is unseemly then that the franchising phenomenon remains an under-researched field in Australia. As the business format has gained such popularity across diverse industry sectors within the Australian economy, the lack of research is truly staggering. Studies conducted to date within Australia have focused on broad areas of franchise sector growth attributes, motivational strategies for international expansion, service quality, survival rates, fee structure, regulatory framework and general structure (McAuley & Wright 2011). On the other hand, areas such as operational strategy, technology and innovation and resource acquisition are inherently absent from research, despite the impressive pool of entrepreneurial real estate organisations populating the Australian real estate industry. It is only in very recent times that the research focus has started to shift towards operational structure, which suggests a developing awareness of franchising strategy as a more complex business format that is able to move beyond its traditional boundaries of operational strategies. Furthermore, Price (2000) proposes that much of the extant franchising literature to date has generally failed to adequately assess whether “franchising delivers as much as it promises in terms of economic performance and financial returns (Price 2000, p. 44). Specifically, Price explains that emphasis is placed on the “success rhetoric” of the franchising and its cultural embedding borne out of lack of government and regulatory body intervention as well as, to a somewhat lesser extent, a consistent failure to consider whether the belief that franchising is both “boundary-less and has a boundless future” does in fact stand.
Thus, the design of this study is directed towards divulging the operational business modelling strategies adopted by both franchised and non-franchised Australian real estate industry organisations. It is envisaged that this paring back of strategic modelling will bring to light a better understanding of what lies at the heart of operational structure so that the emergence of alternative business models within the Australian market can be explained.
The study aims to answer the following research questions:
- Are there similarities between different organisational business models in terms of their operational structure and strategy?
- Do resource acquisition, allocation and distribution strategies adopted by the Australian real estate organisations differ significantly between the franchised and non-franchised real estate organisations?
- Is the emergence of alternative business models within the Australian real estate industry proof that the traditional franchise business model is bounded?
- How do technology and innovation impact on the operational strategy of franchised and non-franchised real estate business models?
- Is there evidence within the Australian real estate industry that franchised and non-franchised real estate organisations are operationally driven by economics of networks rather than economies of scale?
The main aim of the research is to propose an alternativee business modelling framework aimed at assisting franchises to continue to survive, deliver financial returns and effectively compete with non-franchised real estate organisations within the real estate industry network, based on examination of the propensity of non-franchised organisations to compete in the marketplace in essentially the same manner as the franchised organisations. In order to best represent this study, the researcher employs a pragmatic lens augmented by a mixed design methodology. Study data is collected sequentially, commencing with quantitative analysis and expanded upon by qualitative analysis. Following this data collection, trend is fundamental to the principle of this study, that is, to propose an alternative framework for business modelling for the challenged franchised business model.