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The collapse of Australian Go Gecko real estate franchise encompasses some common aspects of franchising with common questions about the future of it’s franchisees.
Go Gecko with approximately 50 locations including 40 franchises made it’s name in the real estate industry with rapid growth by promoting popular capped commissions.
As attractive as the original 2006 $5,950 and then $6,950 capped commissions were it invited problems within the growth strategies of the franchise that were to be exaggerated when the early 2011 floods created havoc within the Queensland market.
Pamela Bennett, chair of the Real Estate Institute of Queensland, said a capped commission meant Go Gecko would have to survive on large volume and a strong rent book for cash flow.
She said this would be difficult given that property deals across the state were down about 45% from their high in 2007. SMH
The combination of a tight housing market and a network of clusters of locations meant the franchisees were going to suffer and the in turn the franchisor revenue plummeted.
Browns Plains franchisee Daniel Alvarez said that when he started with the company there were only a handful of other agents in the state. But he said the phenomenal growth of the company had diluted the growth of individual franchisees.
"Do they care about the success of each franchisee?" Mr Alvarez said. "I'm a loyal person but I'm fed up with the corporation putting franchise numbers ahead of the welfare of each agent."
At this stage the future is unknown for Go Gecko and its franchisees but most franchising observers would not be overly concerned at this particular administration.
Potentially under the rules of administration there will be some unhappy creditors with voiding of contracts and typically miserly deals to tidy up Go Gecko debt. The worst that would be expected for these franchisees would be a brand change in the unlikely event that the franchisor does not exit administration relatively unscathed.
Possibly the biggest question to be answered is whether or not a capped real estate commission franchise concept and perceived encroachment is a sustainable mix?
Note to Franchise Investors: Voluntary administrations in Australia are fast becoming a fashionable trend in tidying up poorly administered franchises in a free for all franchising industry that promotes any remotely saleable concept while attracting everyone else's investment usually leaving communities, suppliers, employees and franchisees to carry the cost when it all goes wrong.