Loading...
Century 21 Real Estate Franchise Worth The Cost? (2022)
Written by: Spencer Huang
This article is based on its most recent FDD.
Contents
Century 21 Real Estate Franchise
Century 21 Real Estate is an American real estate brokerage franchise company founded in 1971. It is a Delaware based limited liability corporation and is also a subsidiary of Realogy Group and Realogy Holdings, which is the nation’s largest owner and operator of residential real estate brokerages.
In addition, Realogy Holdings also owns other subsidiaries, including franchisors of other real estate franchise systems. As a subsidiary, Century 21 operates under the franchise method, meaning that all 1,965 of its American locations are franchised units and none are owned by the company itself.
Michael Miedler took his place as President and CEO of Century 21 in March 2019. Before this role, he served as the Chief Growth Officer and as the Senior Vice President of Franchise Sales. The current President and CEO of Realogy Franchise Group is Susan Yannaccone.
Stepping into the real estate brokerage industry can be a daunting task, considering its substantial initial investment. With this in mind, this article will break down the Financial Disclosure Document for Century 21 Real Estate. Moreover, it will provide all the information that prospective franchisees should know before making an investment decision.
How is the Century 21 Franchise Positioned in the Real Estate Industry?
The residential real estate brokerage industry is a mature industry. Century 21 expects its franchises to compete with other chain-affiliated and unaffiliated real estate brokerage offices in the local market. Realogy Holdings owns subsidiaries – specifically, Coldwell Banker Real Estate, ERA Franchise Systems, Sotheby’s International Realty Affiliates, Better Homes and Gardens Real Estate, and Corcoran Group – that may compete with Century 21 franchises across the United States.
Realogy Holdings owns subsidiaries that may compete with Century 21 franchises across the United States. Specifically, Coldwell Banker Real Estate, ERA Franchise Systems, Sotheby’s International Realty Affiliates, Better Homes and Gardens Real Estate, and Corcoran Grou.
| Brands (1) | Century 21 | Coldwell Banker | Sotheby’s International Realty Affiliates | ERA Franchise Systems | Better Homes and Gardens Real Estate | Corcoran Group |
|---|---|---|---|---|---|---|
| Worldwide Offices (2) | 14,200 | 2,800 | 1,000 | 2,400 | 400 | 200 |
| Worldwide Brokers and Sales Agents (2) | 147,800 | 101,900 | 25,300 | 40,300 | 12,600 | 5,500 |
| U.S. Annual Slides | 377,898 | 753,355 | 173,108 | 113,862 | 88,980 | 26,969 |
| # of Countries with Owned or Franchised Operations | 85 | 41 | 79 | 33 | 5 | 4 |
| Characteristics | A 50+ year leader in brand awareness and a top recognized and respected name in real estate | The only real estate brand that has been guiding people home for 116 years | Synonymous with luxury | Driving performance through innovation, collaboration, diversity and growth | Unique access to consumers, marketing channels and content through its brand licensing relationship with a leading media company | Leading residential real estate brand for nearly 50 years |
| Significant international office footprint | Strong ties to auction house established in 1,744. Powerful global presence | Unique opportunity for flexible branding | Commitment to white-globe service, customer-centric brand, and “Live Who You Are” philosophy |
(1) Information presented for Coldwell Banker includes Coldwell Banker Commercial.
(2) Includes information reported to us by independently owned franchisees (including approximately 15,200 offices and approximately 136,700 related brokers and independent sales agents of non-U.S. franchisees and franchisors).
Century 21 is well-known in the real estate brokerage industry. Along with names such as Keller Williams Realty, RE/MAX, and Coldwell Banker Real Estate.
Pending Century 21 Litigation
In Whitlach vs Premier Valley, Inc(2018), a class-action lawsuit was filed against Premier Valley, a Century 21 Real Estate franchisee. The lawsuit alleged that the Century 21 franchisee “misclassified all of its independent real estate agents, salespeople, sales professionals, broker associates, failed to pay minimum wages, failed to provide meal and rest breaks, failed to pay timely wages, failed to keep proper records, failed to provide appropriate wage statements, made unlawful deductions from wages, and failed to reimburse plaintiff and the putative class for business-related expenses. Resulting in violations of the California Labor Code”. This case was dismissed but is being appealed in California courts.
While concerning, this lawsuit reflects how the franchisee ran their business and is not reflective of Century 21 franchises as a whole.
How much is a Century 21 Franchise?
The estimated total investment necessary to begin operation of a Century 21 Franchise ranges from $24,700 to $269,450, assuming that an existing single office real estate brokerage business will be converted to a Century 21 franchise and meets the requirements for the Office (between 1800 and 3500 square feet).
Should these assumptions not be met, an additional estimated cost in the range of $81,500 to $187,300 is needed to open a new Century 21 franchise, bringing the total investment for a new start-up office to be between $106,200 and $456,750.
In the table below, you can see the breakdown of the estimated initial investment. Note that the initial franchise fee is $25,000 and is nonrefundable. However, those participating in Century 21’s diversity or veteran program can reduce or waive their fee. Each additional Branch Office requires another $10,000 fee. Also, note that many of the expenses listed in the table below are one-time fees.
Your Estimated Initial Investment – Conversion Office
| Expense Item | Amount |
|---|---|
| Initial Franchise Fee | $0 – $25,000 |
| Real Estate | Not included in total |
| Leasehold Improvements | $0 – $105,000 |
| Computer Equipment and Electronic Data System | $5,000 – $10,000 |
| Signs – Exterior | $800 – $20,000 |
| Sings – Yard, Open House and Riders | $2,000 – $5,000 |
| Name Badges (approx.. 7 to 70) | $150 – $750 |
| Miscellaneous | $250 – $500 |
| Other Advertising, including Grand Opening Promotion | $0 – $10,000 |
| Legal Expenses | $0 – $4,000 |
| Office Supplies and Stationery | $1,000 – $7,500 |
| Website | $0 – $30,000 |
| Multiple Listing Services | $0 – $2,000 |
| Data Feed Transmission | $0 – $5,000 |
| International Leadership Academy (ILA) | $0 – $2,200 |
| Insurance Deposits and Premiums | $500 – $2,500 |
| Additional Funds (3 months) | $15,000 – $40,000 |
| TOTAL | $24,700 – $269,450 |
Below, you can see the breakdown of the additional initial investment.
Breakdown of the Additional Initial Investment
| Type of Expenditure | Amounts | Method of Payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|
| Facility and Space Planning | $9,000 – $17,500 | Lump sum | Before Opening | Architects, consultants |
| Security and Other Deposits | $7,500 – $17,700 | Lump sum | Before Opening | Utilities, landlord |
| Furnishings and Communications Equipment | $27,000 – $87,500 | As incurred | Before Opening | Suppliers |
| Prepaid Business Expenses | $3,000 – $4,600 | Lump sum | Before Opening | Rated carriers, government agencies, suppliers |
| Additional Funds (first 3 months after opening) | $35,000 – $60,000 | Monthly payments for our fees; as incurred for other expenses | After Opening | Employees, suppliers, utilities, to us |
| Total Additional Investment for New Start-Up Office | $81,500 – $187,300 | |||
| Initial Investment for Conversion Office | $24,700 – $269,450 | |||
| Total Investment for New Start-Up Office | $106,200 – $456,750 |
Century 21 Franchise Requirements
In order to own a Century 21 Franchise, you must meet certain requirements.
Century 21 does not select an office location, nor will they provide assistance in choosing an office location. They will consider a number of factors related to the building size and location when determining whether to approve a franchise location.
Owning a Century 21 Franchise is conditional upon attending the International Leadership Academy (ILA) program within 24 months of signing the Franchise Agreement. This program consists of about 3 weeks total of training regarding recruiting, agent coaching, also company culture, marketing, and topical issues.
Owning a Franchise Requires Ongoing Fees
The main fees associated with owning a Century 21 franchise are as follows:
- 6% royalty fee upon closure of each transaction, with a minimum royalty fee set at $500 per month
- 2% marketing fee
- 1.5% property management fee upon closure of each transaction
In effect, note that the royalty and marketing fees are slightly higher than the real estate industry averages of 5.9% and 1.9%, respectively.
Additional minor fees, such as Lead Management System fees, Computer Maintenance and Support fees, and Audit Fees, vary by cost and location.
How Much Do Franchise Owners Make?
Century 21 does not make any representations about a franchise’s future financial performance or the past financial performance of franchised outlets. However, if you are purchasing an existing Century 21 outlet, the company may provide you with the actual records of that outlet.
In the following table, you can see the income statement for all Century 21 franchises from 2018 to 2020.
In detail, observe that net income for the year 2020 totaled a net loss of $360 million for the franchisor, Century 21.
Net income has also decreased steadily from 2018 to 2020, signaling that profits at Century 21 locations had fallen even before the COVID-19 pandemic and implying that purchasing a Century 21 franchise may be a severe financial liability if this downward trend continues.
Systemwide Outlet Summary For Years 2018 To 2020
| Outlet Type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2018 | 2,231 | 2,172 | (59) |
| 2019 | 2,172 | 2,089 | (83) | |
| Company Owned | 2018 | 0 | 0 | 0 |
| 2019 | 0 | 0 | 0 | |
| 2020 | 0 | 0 | 0 | |
| Total Outlets | 2018 | 2,231 | 2,172 | (59) |
| 2019 | 2,172 | 2,089 | (83) | |
| 2020 | 2,089 | 1,965 | (124) |
Additionally, note that the total number of Century 21 franchises has decreased from 2018 to 2020.
In each successive year, the net change in total outlets decreased, suggesting that there may be underlying issues with owning a Century 21 franchise.
It is perhaps for these reasons that a new leadership took place in December 2019.
We will have to wait to see the results of new CEO Michael Miedler’s work, but it is important for prospective franchisees to understand the underlying downward trends in net income and the total number of franchises of Century 21.
Is The Profit That A Century 21 Franchise Makes Worth The Franchise Cost?
All things considered, Century 21’s overall consolidated income statement presents a red flag for potential franchisees. Declining net income over the past three years coupled with negative net income raises issues of short-term profitability and long-term viability of owning a franchise.
While Century 21 may not be the business for you, other real estate brokerage businesses may present a more solid financial picture. Refer to the Vetted Biz real estate industry page for more information.
