Why Shop Local?
The term “Shop Local” has been used to describe supporting the local independent businesses in your community. It is no secret that supporting local businesses helps to cultivate a strong local economy… but why?
To start this discussion, it would be prudent to identify the difference between a local independently owned business and a franchise business.
A local independently owned businesses is one that is native to the community that it serves. These businesses come in all shapes and forms. They are your local Grocers, Farmers, Retailers, and yes…Real Estate Brokers. These businesses are typically owned by members of the community and have no forced placed monetary obligations to outside sources that are not native to the area.
A locally owned franchise business is one that is NOT native to the community it serves. The nature of a franchise is to provide a Franchisee (a person interested in buying into the name and procedure of the franchise) with a “one stop shop” solution for operating a business. When a Franchisee decides to go into a partnership with a Franchisor, they agree to operate their business with the standards and procedures that the franchise has set forth.
So What’s The Big Deal?
Franchises do not offer their name and business solutions for free. There is typically a lump sum of cash that a person needs to pay up front to take on this purchased persona. Furthermore, there is usually a garnishment of the businesses revenue that is paid for royalty fees and marketing expenses equaling on average 8% of the gross revenue of the location. Both of these fees take money out of our local economy.
One Step Further…
To further express this loss of money generated in our local economy, let’s talk about the real estate industry. One of the oldest industries out there, the real estate industry has established some of the most influential brands in the world. Real estate markets across the world have been dominated by these brands for decades.
When you look to the real estate market in our community you can see that with out a doubt the 4 most popular franchises in our area dominate the market.
Don’t think so? Check out these numbers:
- Over 4 billion dollars in sales volume for residential and commercial real estate transactions happen each year in our 6-county area. Yes, we said Billion.
- The number 1 firm controls 47% of the sales volume in our area.
- The top 9 firms (out of 185 separate entities) control over 75% of the markets sales volume.
Now these numbers are used to express the sheer market share that Franchises control in our community. To really understand how money leaves our local economy because of Franchises you have to take into consideration that Franchises employ over 80% of the licensed Realtors in our area. The partnerships that these brokerages have with their Realtors are what generates a large share of the revenues for their business. It is these dollars that are subject to an (on average) 8% fee for royalty fees and marketing fees. This equates to dollars leaving our local economies over the course of a year in the Millions due to outside interests from the real estate industry.
What can we do about it?
Like any other business, the way that you can combat the loss of this money from our local economy is to support a locally owned real estate brokerage to handle your real estate transactions. Locally owned real estate brokerages typically have less fees for real estate agents and clients.
Also, keep in mind that this is not only happening in the real estate industry. Nearly every local business in town has a franchise business that it competes with. If you choose to support local whenever possible you can participate in a movement of people that are fighting to keep more money in our local economy!