A Brand World: Cendants Many Signs of Success

The Cendant Real Estate Franchise Group truly exemplifies the franchising movement in modern real estate. In fact, it virtually defines it. By charting out aspecific course and never looking back, Cendant has been able to acquire and leverage the collective power of some of the industrys leading brand names, which deftly manage to co-exist as both a family of companies and as healthy competitors. How is it possible? By combining the individual strength of the brands leadership with the parent companys vast resources and strategic focus on operational excellence.

Even Alex Perriello, the Franchise Groups newly appointed president and CEO, once found the concept baffling. A member of the Coldwell Banker family since 1983, Perriello once watched in disbelief as Cendant Corporationat that time HFS, Inc.started on its path of acquiring leading real estate brands.

When HFS bought Century 21 in 1995, we at Coldwell Banker thought, thats unusual, Perriello recalls. Then they announced they had acquired ERA, and I thought, How will that work? How can one company own two competing real estate brands?

When HFS eventually acquired Coldwell Banker in 1996, Perriello recalls that he was just one of a handful of people to leave sunny California to follow the brand to Parsippany, New Jersey, the current headquarters for Cendants Real Estate Franchise Group.

When I came to New Jersey, I came partly for the opportunity, but the other part was curiosity, Perriello explains. He laughs. It was one of the best decisions I ever made.

Perriello was appointed to lead the Cendant Real Estate Franchise Group as president and CEO this past April, succeeding Bob Moles, who stepped down after seven successful years with the company. Perriello now reports directly to Richard A. Smith, chairman and CEO of Cendants Real Estate Services Division. In addition to the Franchise Group, the Cendant Real Estate Services Division also includes: Cendant Mobility, Cendant Mortgage, Cendant Settlement Services Group and NRT Incorporated.

Prior to his appointment, Perriello served as president and CEO of Coldwell Banker Real Estate Corporation since 1997. As part of the restructuring, Jim Gillespie was promoted from chief operating officer to president and COO of Coldwell Banker.

My philosophy has always been, whatever job you have, do it better than anyone else ever has and good things will happen for you, Perriello says. Obviously, Perriellos philosophy has paid off in spades. His in-the-trenches real estate experience combined with his executive years within the Cendant corporate environment makes him particularly well suited for the job.

As Perriello explains, Coming into this position with a knowledge of Cendant and how it operates and already knowing the brand presidents and the heads of support services, makes this a culture and a business that I already know.

And what a business it is to know. Currently, the Cendant Real Estate Franchise Group comprises approximately 13,000 franchised and company-owned real estate offices and 265,000 brokers and agents worldwide, operating under one of Cendants five real estate brands: Century 21, Coldwell Banker, Coldwell Banker Commercial, ERA and Sothebys International Realty. At the close of 2003, the Real Estate Franchise Group recorded $458 billion in total sales volume for the year and totaled 2.16 million real estate transaction sides. According to Cendants statistics, the companys brands were involved in one out of every four homes bought or sold in the United States in 2003. Quite literally, the Franchise Groups numbers say it all.

It is not only this top-producing real estate entity that Perriello is inheriting, however, but also a company that continues to thrive on growth and expansion, building on the mega numbers and ubiquitous presence its brands already boast. Case in point: Cendants recent licensing agreement to allow its subsidiary to operate the Sothebys International Realty brand and its planned separation of Coldwell Banker Commercial into an independent business unit apart from Coldwell Bankers residential real estate operations.

These two recent maneuvers speak directly to the Franchise Groups continual focus on its value proposition, or value circle as it is often referred to, that was developed when Cendant first formed the Real Estate Franchise Group in October 2000. The goal of the formation of the Group was to accelerate the growth of the brands while paying attention to each brands individual strategy. By sharing efficiencies behind the scenes, like administrative and operations functions, each Cendant real estate brand has been able to flourish while maintaining its respective, unique identity in the marketplace. As part of the Cendant Real Estate Services Division, each Franchise Group brand is also able to capitalize on additional synergies and cross marketing opportunities such as branded mortgage products and settlement services through its Cendant sister companies, further enhancing the value circle.

Perriellos first priority is to ensure that the Cendant value circle is being utilized by each of the brands and leveraged on their behalf.

My number-one focus will be to grow our brands collective market share both domestically and internationally and really leverage the resources of the Cendant value circle, Perriello explains. The first thing I did was to sit down with each of the brand presidents one-on-one to go over their strategic plans line by line. I met with the heads of our support services departmentssales, administration, information technology, compliance, legal, learning, accounting, finance, business development and communicationsto see what their strategic plans were. I was looking for alignment. I wanted to make sure that our Franchise Group support teams were working on what the brands felt was important. And we are definitely on the right track.

The ability of the Cendant brands to maintain their individuality while competing under one roof may seem hard to imagine, yet it happens every day. Perriello says the secret is hiring good leaders.

Each of our real estate brands is very, very well run, Perriello explains. You have to have business leaders who know what the customers want and will fight hard to get that, and we do.

Each brand has its own dedicated staff and advertising funds thats all separate and distinct for each brand, Perriello continues. By keeping it that way, there is a healthy spirit of competitiveness that exists among all the brands. Everyone at the corporate level likes and respects each other, but their jobs are to grow their individual businesses. That culture has been in place since the day I got here.

All in the Family: The Cendant Brands

Despite the active involvement of a very present corporate parent, the brands within the Cendant Real Estate Franchise Group manage to operate with distinctly individual strategies due, at least in part, to the diverse personalities and backgrounds of their respective leaders. Look under the hood and you will find very different companies, with very different strategies, each working toward the same goal for the benefit of their franchisees and Cendant (NYSE: CD) shareholders alike: growth.

Century 21: Growth for All

According to company CEO and president, Van Davis, the first quarter of 2004 was a record quarter. We did not expect the strength that we saw in the first quarter and did not expect the interest rates to dip, he explains. Based on industry data, the second quarter is also shaping up to be strong as the economy improves and people re-enter the job market.

To ensure the continued success of the Century 21 network, Davis focuses on profitability, which lies at the center of the Century 21 broker and agent value circles. We strive to help maximize the profitability of our brokers and agents, says Davis. If we dont, theyre going to go somewhere else.

To enhance this strategy, Century 21 developed a proprietary set of Broker Financial Tools and Agent Financial Tools. These individual suites of Internet-based planning tools help brokers and agents develop work plans and strategies for achieving their financial goals. To that end, Agent Tools are designed to help sales associates better list and sell properties, while Broker Tools help broker/owners develop the financial and planning skills that will help drive their success, including methodologies for holding themselves accountable and strategies for recruiting and retaining the best agents.

Davis says the key to supporting the broker and agent value circles lies in the strength of Century 21s technology and educational platforms. By utilizing both financial tools and training programs online, Century 21 System members are capturing a better rate of success, faster.

The continued development of its technology platform is a major goal of Davis for the future of Century 21, as is meeting the needs of a diverse national market. There will be five million new households in America over the next five years, and three million of those will be African-American, Hispanic and Asian, he reports, adding that Century 21 is uniquely positioned to capitalize on this demographic shift with a name that is already globally associated with the best in real estate.

Davis sees continued financial success for the Century 21 System in the year ahead. Affordability is in place with the interest rate still low. The American Dream is very much alive, and the Century 21 System delivers that dream.

Coldwell Banker: Improving on History

For Jim Gillespie, his recent appointment to president and COO of Coldwell Banker Real Estate Corporation is the perfect way to celebrate his 28th anniversary with the company on June 4.

I walked in to Coldwell Banker as a sales associate and have been fortunate to have worked in almost every aspect of the business, from sales to managing branch offices, running large metropolitan Coldwell Banker companies, overseeing regions of the country, even working at the corporate level of our relocation company, says Gillespie. I want to continue to lead the company as Alex has. We have almost doubled in size over the last six or seven years. I want to continue that process.

According to Gillespie, Coldwell Bankers consistent success over the years stems from one source: The fact that we are cutting edge in almost everything that we do.

Also key to the Coldwell Banker strategy over the years has been a keen eye toward service. Our servicing structure has remained unchanged, reports Gillespie. We have three service regions, and each region is run by a senior vice president. Each of these senior vice presidents has been with Coldwell Banker close to 30 years. This allows us to have a common philosophy.

Education is another important tenet of the Coldwell Banker philosophy, conducted on many levels and through many venues throughout the Coldwell Banker system, including field training, large classroom training at Coldwell Banker University and online versions of educational programs at CBU.com, which offers learning on demand.

For the year ahead, Gillespie says, We want to continue to be a full-service company and a leader in luxury marketing. The Coldwell Banker System posted just under 14,000 million-dollar-home sales in 2003 ... thats a 24 percent year-over-year increase. Weve got agents certified by our Previews International luxury home program who are specially trained to handle high-end properties.

Despite Coldwell Bankers well-steeped history in the real estate industry that dates back to 1906, Gillespie feels that Cendant has been directly responsible for the companys exponential growth in recent years. Because Cendant is committed to being in the real estate industry for the long haul, it has been able to put together a value circle for the benefit of all its brands. Thats never been done in the real estate industry. We were really good before Cendant came around, but as a parent company, Cendant has made Coldwell Banker even more superior.

ERA: Specializing in the Future

According to Brenda W. Casserly, president and COO of ERA Franchise Systems, Inc., the ERA brand is unique in three ways: growth; innovative products and services; and the companys Always There For You culture.

ERAs position in the marketplace is a growing one, reports Casserly, with the system having added approximately 61 new offices in the first four months of 2004.

Part of ERAs successful strategy has been to continue to invest in innovative products and services for its brokers and agents as well as consumers. Casserly points out two major deliverables in that arena: ERAs expanded Web presence, with an increased functionality platform, and an enhanced Sellers Security Plan. Strengthening its technology and support services in this way has only served to attract more players to join the ERA network, says Casserly.

Sales associates recognize the value of our innovative products and services, Casserly explains, but the number-one driver has always been the same: they are attracted to and impressed by the quality of our culture. The ethics and reputation of the local ERA companies distinguish the overall positioning of the brand. You continue to select companies of quality, and those quality companies then become your reputation. The ERA vision, supported by the actions of our sales associates, begins with integrity and ends with service.

ERA has also aggressively courted emerging markets. Approximately $1.8 trillion will be spent by emerging markets in the United States by 2008, says Casserly. Thats mind boggling. Realtors tended to think that diverse markets were just in high metro-area populations. Now they are learning that these opportunities exist everywhere across the country.

Looking toward the future, Casserly believes successful real estate professionals will need to continue to focus on providing full service and paying close attention to third-party interlopers trying to market listings and capture commissions. Many brokers are assuming that theyre not a threat, but the real estate community needs to be aware and educate the consumer.

Sothebys International Realty: The Newest Addition

In February of this year, Cendant added to its family of big-name real estate brands when one of its subsidiaries entered into a long-term agreement to license the Sothebys International Realty brand name. Cendant will now be responsible for developing the Sothebys International Realty franchise system and its company-owned operations.

The Sothebys International Realty brand is an exciting opportunity for us, says Perriello. The Sothebys name is unparalleled in the luxury market. We are building the platform for an extremely sound franchise organization.

At the helm of the Sothebys International Realty operations is 27-year real estate veteran Michael R. Good, former executive vice president and chief operating officer for NRT Incorporated, a Cendant subsidiary. As Good explains, with 260 years of brand recognition, the Sothebys name, panache and image will provide Cendant the opportunity to achieve true market ownership of the high-end niche.

Cendant will operate the Sothebys International Realty brand as a luxury franchise system, says Good, as he and his team put into place the infrastructure and support system that will allow the brand to benefit from the resources of its new parent company.

Like other Cendant brands, the Sothebys International Realty franchise system will pursue an aggressive growth strategy via affiliations and acquisitions. The first step is to create an experienced sales force that understands this unique brand and who will be dedicated exclusively to Sothebys International Realty affiliations, says Good. Were also conducting an extensive market evaluation to define the appropriate new geographic areas we need to be in. The third thing we will do is refine our membership criteria. Were definitely raising the bar. There will be very specific qualifications that real estate brokerages must meet to be part of the system. We have already had a tremendous number of inquiries; theres a waiting list of people who would like to have that dialogue with us because they see this brand as very distinct and prestigious.

According to Good, the brands connection with Sothebys auction house and its access to the auction house clients gives it an automatic competitive advantage among other luxury brands. Theres no other real estate organization that has that possibility, says Good. There are certainly other national and franchised companies that do business in the luxury marketplace, but we expect the Sothebys International Realty network and franchise companies to be recognized as a quintessential luxury brokerage membership system.

Good indicates that the new Sothebys International Realty identity program will recognize the strong, local branding of independents. This will be more of a fifty-fifty relationship, says Good. You will see the independents name positioned prominently with the Sothebys International Realty identity to maximize the blending of the brokers existing local brand equity with the power of the national brand.

Coldwell Banker Commercial: On its Own

Coldwell Banker Commercial has been gaining significant momentum in the commercial real estate world thanks to its extraordinary strength in the secondary and tertiary markets and its double-digit growth in revenue, specifically 36% over first quarter 2003.

Due to this growth, Cendant plans to make Coldwell Banker Commercial a separate operating company apart from Coldwell Banker in the near future. The companys president, George E. Slusser, was promoted to president and COO of Coldwell Banker Commercial, and he now reports directly to Perriello.

In the last two to three years, Coldwell Banker Commercial has focused on major markets and commercial-only relationships, which is more typical of the commercial real estate industry, Slusser explains. The breaking out of the company as a separate operating unit is a natural progression into becoming a full-service commercial company, 100 percent dedicated to helping its affiliates succeed in the commercial real estate arena. This will help us from a client standpoint, from a mergers and acquisitions standpoint and, primarily, from a growth standpoint.

Most of the commercial companies do not have strong parents, he says. Cendant came into commercial real estate and is helping to consolidate it and provide economies of scale and the delivery of quality services. Larger does not always equate to better, but it does equate to better tools and services.

Slusser is confident about his companys ability to deliver on increased expectations. Were coming at the major markets through the back door with a three-pronged approach that I call the Triple A ap-proach. First, through acquisitions and affiliations. The third A is for aggregation. Our offices have grown organically by recruiting teams of commercial real estate practitioners from other entities.

As in the residential real estate arena, Cendants ability to provide Coldwell Banker Commercial with important resources will play in the companys favor. Offering a full complement of tools and systems to local owners is an important change in the commercial real estate industry. Cendant created this model over many years. Were good at franchising and offering a bundle of services.

According to Slusser, the last three years have been very difficult in the commercial real estate industry. That makes our growth even more phenomenal, he adds. Our best growth is ahead of us.

Growth in an Uncertain Future

For the Cendant Real Estate Franchise Group, theres no such thing as too much growth. Perriello and his brand leaders will continue to be charged with expanding the reach and market share of the groups five brands. Perriellos strategy for achieving that growth is succinct and to the point.

Looking at it domestically, says Perriello, first, we have to help our existing affiliates grow their businesses. We have to provide productivity enhancement tools and training so that our brands sales associates feel they are better off with that brand. Then, we need to look at geographic and demographic markets on an individual basis and identify new potential franchisees that strengthen our brands presence in that market.

While the size of the Cendant Real Estate Franchise Group is of tremendous proportion, the ultimate key to growth lies in the most basic of details, says Perriello: the individual sales associate. Perriello knows this well, having begun his real estate career as a sales associate with Coldwell Banker in 1976.

I dont view the sales associate as the lowest level its the most important level, says Perriello. Thats where the rubber meets the road.

My experience as a sales associate gives me a perspective of how difficult this business is and the challenges they face. It gives me a great deal of credibility that I have walked a mile in their shoes. I know Im only successful when our salespeople are successful.

Having this close identification with sales associates helps Perriello to be grounded and to have an understanding of the business from every level. The customers perception of each brand starts with the person who has this business card and hands it to themthats the moment of truth. My job is to help our brokers and sales associates be successful. They dont work for meI work for them.

Behind the Scenes: The Franchise Operation

The Cendant Real Estate Franchise Groups franchising prowess is backed by a dedicated sales team responsible for building the presence and market share, both domestically and internationally, for all of the Franchise Groups brands: Century 21, Coldwell Banker, Coldwell Banker Commercial, ERA and Sothebys International Realty.

Brien McMahon, executive vice president of franchise sales, is the leader of this department. The best way to look at us is as the sales force for our brokers. We like to proactively seek out growth opportunities via mergers and acquisitions for them in their marketplaces.

The Cendant real estate franchising success story is evident. When a company joins a Cendant brand, they typically dont leave. They stay as part of the family, says McMahon. That helps us attract new prospects.

When looking to bring a company into one of Cendants brand networks, McMahon and his team evaluate several factors about the prospective company, while simultaneously reviewing the market share of the respective Cendant brands in that area. This helps them to assist the prospect in determining which brand may be the best fit for them.

The Cendant real estate franchise sales team has 115 salespeople working throughout the country. We become a broker in between the brokers, McMahon explains. We take the emotion out of the process.

The overall goal for McMahon and his group is to take the individual Cendant brands to the next level, and to accomplish that, he relies on the support of the individual brands as well as the parent company.

Its not just about going in and franchising, he explains. When we walk into an unaffiliated company, we are trying to create a long-term plan. A key advantage is that Cendant invests capital to help our brokers grow. We have such a great value proposition that its hard for a broker to not feel compelled to join one of our brands. With a company like Cendant to support them, they can say, Im wrapped up in my day-to-day responsibilities, but I know that someone is looking out for my organization for the long term, and that means a lot.

Ultimately, as in all areas of real estate, franchise sales boils down to building relationships, McMahon says. A company that may have resisted franchising for years will all of a sudden pick up the phone and call you. Its because we have always been professional, stayed in touch with regular visits and built a good relationship with them. Our goal is to always be there and to always have them thinking of the advantages of being affiliated with one of the Cendant real estate brands.

Andrew Adams writes for http://www.magfranchise.org where you can find out more about franchising and other topics.Kt55