Property: Beyond The Pale
Douglas Newman Good has become the latest agency to take the franchise route to grow its market share outside the Greater Dublin Area, writes Ciaran Brennan.
Managing partner of estate agents Douglas Newman Good Keith Lowe is a busy man these days - and life is just about to get busier. As well as preparing for the arrival of a third child with wife Jill, he is in the process of rolling out the company's nationwide brand campaign.
It is not just the Lowe family that is expanding. Since last May, when Douglas Newman Good launched the initial phase of its DNG Nationwide national franchise network, 16 new branches have been added to the company's network. A further 16 are in the pipeline and Lowe said he expects to have 50 franchise branches signed up by December 2005. The company also has 16 branches within the Greater Dublin Area.
"Prior to franchising, we were simply in the Greater Dublin Area - the furthest out was Bray in the south, Skerries in the north and Naas in the west," said Lowe. "We had the greater Dublin area pretty tied up. We held 20% of the market which we still maintain - and which we believe from the investigations we do is more than anybody else would have."
With the bulk of the property action still happening on the eastern seaboard, some may have been content to sit in such an enviable position, but competition and consolidation within the marketplace made the decision to franchise inevitable, according to Lowe.
"We realised we had to do this because if we didn't do it, we believe we would get left behind," said Lowe. "If you don't keep your foot on the pedal in any business, your competitors will pass you. We felt looking at the market there was opportunity for one more large franchise agent. We don't believe there is room for another to come into the equation after us."
Around nine months ago, DNG hired Michael Glynn who had worked extensively with the Sherry FitzGerald franchise group and Property Partners to oversee the roll-out of its new franchise operation.
DNG's aim is to overtake Sherry FitzGerald as the number one player in Ireland. It won't be an easy task - Sherry FitzGerald, which entered the franchise market nearly six years ago, is the largest estate agents chain by a long shot with around 90 offices. Property Partners occupies the number two spot with nearly 70 branches. Lowe says the addition of 50 franchise branches to its Dublin network should allow it to catch up and pass Property Partners by the end of the year.
The company had looked at the option of growing organically by opening up its own branches in various regional locations, but discounted the strategy for a variety of reasons, according to Lowe. "We could have tried to do it ourselves and we looked at that," he said. "The one thing we recognise is that, in local areas, local personalities are very important. When we went to outlying areas [in Dublin], Skerries for example, we took over an existing business there and that was very important. When we went to Bray, we took over a firm there.
"To go out and do it yourself around the country would be a very difficult task. You would have to go out and start buying businesses and that's a huge investment, it would be very difficult and take forever."
According to Lowe, the franchising route offers a win:win scenario for both parties - DNG gets geographical coverage with well-known local players, while those players in turn get access to its branding, media advertising, property research department, in-house training programmes, IT and the Dublin property market.
"In the majority of cases, we have gone to existing State agency practices who want to get the advantages of being a part of a large organisation. They essentially pay us a percentage of their turnover. They trade under our name. They go into our advertisements, they get our training processes and computer software. A lot of country agents want access to the Dublin market so we can give them access. It goes two ways."
New franchise agents will also have access to the company's mortgage-broking business, GMC mortgages, which Lowe said drew down close to €400m in mortgages last year. "With a lot of our operators, we are putting mortgage brokers into their branches and we are offering another service, another arm that they wouldn't have had without us. It is giving something extra."
The company is also spending heavily - around €2m - on advertising, marketing and branding.
It is currently running a nationwide radio advertising campaign and will launch a TV campaign towards the end of the year. It is also investing in its offices - it recently opened its first café-style branch in its Dún Laoghaire premises, where customers can sit down and get refreshments. It also boasts plasma screens and e-motion window display units.
"We're just trying to change the face of auctioneering a little bit. We're just trying to bring it on to the next level. We are planning to do the same in Phibsboro."
The arrival of DNG into the franchising market has put further pressure on independent firms. Competition on fees has made it difficult for small players to differentiate themselves, while at the same time they are facing competition from franchise agents who have access to the deeper pockets of the parent organisation.
"Like any industry, the auctioneering business is consolidating," said Lowe. "As the big brands become stronger, it will become more difficult for the smaller operator to survive."
A quick glance in the property pages in newspapers over the past year shows the number of auctions conducted by sole traders declining compared to those by chains, according to Lowe, who said it is indicative of the change in the overall market and explains why DNG has had a very good response from agents wanting to franchise.
"We have a lot of people who want to join but we're not just taking anyone," he said. "We have a very good name and reputation and we have to make sure people live up to that reputation. For every one we take, we have about three or four applications and it is matter of getting the people who are going to fit in."
Reputation is an area where the auctioneering and estate agents business has been feeling the heat in the past number of years. Lowe says the vast majority of agents are getting sullied by the actions of a few.
"In the UK, the reputation for estate agents is appallingly bad," he said. "In Dublin, there is a much more professional and ethical code to agencies but, in saying that, it hasn't been good in the past few years. The reason for that is people have just been allowed open up business with no qualifications whatsoever, they can go into court and get themselves a licence and off they go. That is a ridiculous situation."
The Government is currently looking at the regulation of the industry and recommendations are expected in the summer with legislation to follow.
"We encourage it and we look forward to seeing what they come out with," he said.
One area may be guide prices - an area in which the whole industry and not just a few rogue players has been criticised for the unrealistic prices quoted.
"I agree there is a problem with auction guides. But it is industry standard and we follow industry standard. If the Government comes out and changes it, we will go with whatever happens. Prior to me ever coming into the industry, it was this way. You have to remember, we act for sellers and it is our job to get the last penny for them."
Last year, DNG sold property in the region of €1.25bn, and Lowe said, with the bigger network, he expects this to rise to €2bn this year. Even without going down the franchising route, DNG's business rose by 15% through its Dublin offices, indicating a very buoyant market. Lowe said the more dire predictions of a property crash are unfounded and has dismissed it as scaremongering.
"All fundamentals are right in the economy," he said. "We're living in a low-interest-rate environment. Unemployment is extremely low and economic growth is forecast at 5.5% this year."
Keith Lowe first started working for Douglas Newman Good during his school summer holidays, shortly after the company began operating on Dublin's Dame Street in 1982. He continued to work for the company when he went to study in the College of Commerce in Rathmines, spending his free afternoons putting up the company's boards around the city. Leaving college, he trained as an estate agent in Dame Street where he worked until he was tasked with opening DNG's first branch in The Square in Tallaght in 1990. In 1993, he opened another new branch in Stillorgan. He remained there for eight years before transferring to the company's new head office in Leeson Park, in Ranelagh, as assistant to then managing partner, Paul Newman. Lowe took over as managing partner of the whole group in 2002.