Century 21, a California-based real estate franchiser, won a temporary injunction in the Circuit Court in Richmond last week blocking new state regulations that would have prohibited affiliated local brokers from subordinating their identities to those of the corporation issuing the franchise.
At the same time, Realty World Corp., a Virginia-based franchising firm, filed a $1.1 million damage suit against the commission in U.S. District Court in Alexandria on the same grounds.
The Virginia Real Estate Commission regulations, which were scheduled to take effect Jan 1., would have obliged realtors to take out business licenses in their own names, not the names of their franchisers, and to give the local brokers equal billing in advertising with their franchisers.
According to the commission's manual, the regulation is aimed at relieving confusion over the identity of brokers by letting customers know they are really dealing with a local firm, and not a national one, particularly when it comes to claims.
A real estate commission member, who asked not to be named, said the issue boils down to this: "The public thinks they're dealing with a large company (the franchiser) which will protect them, when in reality they are dealing with Joe Blow Realty. There is no way that the franchiser will get their money back if they have trouble with Joe Blow."
At the heart of cases in this region and elsewhere lies the fierce economic competition between national franchisers and local brokers. There are now five national franchisers with member offices in Virginia. The Virginia Real Estate Commission estimated that the new regulations would affect two franchisers with a combined total of 51 member firms in Virginia and 940 licensed brokers and agents; there are 24,000 active licensed real estate brokers and agents in the state. None of the members of the real estate commission is associated with a franchised firm.
Though independent real estate firms remain in the majority natiionwide, the national companies are fast taking over. Century 21, for example, now has 6,000 franchises across the country, compared with 4,000 a year ago. The national company's earnings for fiscal 1978 were $3.9 million on $23 million in sales, up from $1.9 million on $11 million in sales.
A spokesman for the Realty World corporation said, "As a whole, (our) franchisees double or triple business the first year. They have to be taking that business from someone."
The franchisers have argued that the new regulations would cost each francise $2,000 to change existing signs, letterheads, and business cards. It would cost another $50,000 to change the logos and type size of institutional advertising in Virginia, the firms argued.
The franchiser's role is to market his product -- expertise, training, and advertising -- with the local broker in exchange for an initial fee plus a share of the proceeds.