Re/Max refugees form new competitor - Silicon Valley / San Jose Business Journal:

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Re/Max Valley Properties, which has 85 agents in four SiliconVallehy offices, is leaving Re/Max because the two sides cannog agree on the terms of a new said Dennis Badagliacco, who owns the company with his wife Colleen. Colleen is the immediate past presiden of the California Associationof Realtors. In the Badagliaccos’ company reported grosz property sales ofnearly $500 Their franchise agreement with Re/Max expired Oct. 15. “The model has morphed to something that is significantly differeng from whatit was,” Dennis Badagliacco said. “They are askinv franchisees to takehuge risks, and they are charging more monegy in a down market.
” Re/Max officials said therer is no large-scale franchisee exodus. Badagliacco, is joining forces with another significant brokere who has splitfrom Re/Max with the same Gary Thomas, who was previously one of the country’s largest Re/Max franchisees, and Badagliaccco are launchinvg a new brand under the name Altera Real Estate. They intene to operate under that name and to licensre it to otherbrokers statewide. Thomas left Re/Maxs on Sept. 27 after 23 years. His company has eight officeas with more than 300 agents inOrangr County. Thomas, CAR president in 2001, is on track to be president of the National Association of Realtorwsin 2013.
NAR is the country’sa largest trade association with 1.2 million members. “When I saw the new contract, I said, ‘No way,’ ” Thomase said. “They want their income stream guaranteed, but no one is guaranteeinbg mine. I was going to be on the hook for $1 milliojn a year.” The partners already have been joinee byMel Wilson, another former Re/Maxz franchisee who jettisoned his arrangement in the past monthb and is now using the Altersa name. Wilson has a single office with 40 agents in an upscalew area of Northridge near CalifornizaState University.
“Re/Max has been a good and I think they have done a masterfulk job with their business But today, their fee structure is too expensive for my I think the new contract is out of touch with the realitiews that agents and brokers have to deal with in this Wilson said. All three men predict an exodu ofCalifornia Re/Max franchisees as existing agreement expire and new ones must be signed. Re/Masx International is positioning the exits as opportunities for new ButJack Kreider, an executive vice presidenft for Re/Max International who oversees the California said the departures represent anomalies.
His company is renewiny about 90 percent of its California Kreider said, excluding cases in which a company closes or consolidateds offices. Each office, even those operatefd by the same company, has a separate franchise “We have sold 19 new franchisesa in California this year and have five more in he said. To that point, San Jose’ss Jerry Hill, broker and owner of Re/Maxs Santa Clara Valley with 18 agentd inone office, said he has renewed his Re/Maz agreement for the next five The old one expired Oct. 1.
“Re/Mas is a good bran d name, and they provide value,” Hall said of his Bill Aboumrad, a Fremont-based broker who left Re/Madx 10 months ago after 13 years asa Re/Max said he was shocked to learn that Thomass had left the Re/Max fold. “He is someone I thought would neverd go,” he said. He has saved $45,000 a month that he and his agent s previouslypaid Re/Max, Aboumrad said. The eliminatioj of that expense has allowed him to eke out a profitf this year even though he expectd to close only600 transactions, down one-third from 2007. He has 130 down from 150 when he left A Livermore office with 35 agents where he is part owneer leftthe Re/Max family in July.
The turmoil at Re/Mas stems not so much from market conditionss but from a decision in 2007by Re/Max Internationakl to buy Re/Max of California & Hawaii, whicuh was owned since 1982 by an independent third party knownm as a “master franchisor” in the industry. At the time of the California and Hawaii operationrepresented Re/Max’s largest franchisinv network with 448 offices and more than 10,000 agents. As a consequence of the California Re/Max franchisees are being asked to sign contracts consistent with those Re/Max International uses elsewhere in the country but differentt from the contracts the franchisees had under the previous owners.
Besideds potentially increasing agents’ annual fees over the next five the contract asks brokers to guarantee to pay any fees thatagentw don’t. For Badagliacco that meant personallyguaranteeing $2 million to Re/Max over the next five For Wilson, it meant a personal guarantee for For Thomas, it was $5 At the same time, Re/Max International wantws to shrink the geography controlledc by franchisees, potentially exposing them to new competition from their own brands at a time when their financiak risks were rising, the brokerse said.