Sorting, Franchising and Real Estate Brokerage Firms

Real estate markets remain localized and reflect differences by region. With a large number of brokerage firms and a smaller number of franchisors, a testable hypothesis is whether in equilibrium fees and royalties are equal to the additional return to the franchisee. If fees are set uniformly acros...

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Bibliographic Details
Published in:The journal of real estate finance and economics 2007-02, Vol.34 (2), p.189-206
Main Authors: Benjamin, John D, Chinloy, Peter, Winkler, Daniel T
Format: Article
Language:English
Subjects:
Brokerage
Commercial property
Companies
Cost analysis
Costs
Economic rent
Economies of scale
Fast food industry
Fees & charges
Financial management
Franchisees
Franchising
Hypotheses
Hypothesis testing
Market equilibrium
Marketing
Profitability
Profits
Real estate
Real estate agents & brokers
Real estate companies
Real estate market
Regional differences
Regional disparities
Rents
Return on investment
Royalties
Sales
U.S.A
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Summary:Real estate markets remain localized and reflect differences by region. With a large number of brokerage firms and a smaller number of franchisors, a testable hypothesis is whether in equilibrium fees and royalties are equal to the additional return to the franchisee. If fees are set uniformly across the country, economic rents may be earned in specific local markets. Some franchisees may earn excess profits from the franchise arrangement. Empirical results for 1,143 United States residential brokerage firms in 2001 show standardized uniform franchising costs cover any added returns to franchises in the Midwest and South. Excess returns are present for franchisees in the Northeast. The probability of being a franchisee increases with size and scale. [PUBLICATION ABSTRACT]
ISSN:0895-5638
1573-045X
DOI:10.1007/s11146-007-9008-z