Real Estate Franchise vs Independent: Read the Contract

Search real estate franchise vs independent brokerage and you will find the case for each side argued confidently. Look at who is arguing. The franchisors and the consultants who place franchisees earn a commission on yes. The cloud brokerages that recruit against franchises earn on no. There is real money on both sides of this question and none of it is on yours.

Then there is this, from the National Association of REALTORS, describing its own biennial franchise report:

The data is provided by the companies and not independently verified. Every franchisor also provides this information and more in the Franchise Disclosure Documents required by the Federal Trade Commission.

The industry's trade association publishes a franchise comparison, tells you in writing that the franchisors supplied the numbers and nobody checked them, and points you at the documents that are checked. Almost nobody follows that second sentence.

We did. We pulled one franchise disclosure document, all 491 pages of it, and read it. This is what is in there.

What we got, and what we did not

Being straight about this first, because the rest of the post depends on it.

We set out to pull filings for eight brands. We got one: Keller Williams Realty, LLC, dated April 15, 2025. Every figure and every quotation below comes from that document and nowhere else.

The other seven, RE/MAX, Century 21, Coldwell Banker, Realty ONE Group, EXIT Realty, NextHome and HomeSmart, we could not retrieve. The state portals that publish these documents are built for a person clicking through a browser, not for automated retrieval, and we ran out of road. So this post is not a comparison of eight brands. It is one contract, read closely, from the largest brand by agent count and the one a new broker is most likely to be weighing.

Two things follow. Everything here is specific to Keller Williams and you should not assume another brand's agreement matches it. And the useful part of this post is not the numbers, it is the list of places to look, because you can pull your brand's filing yourself. The last section explains how.

One more piece of housekeeping. Before we found the document, we looked at what the franchise-referral sites publish, and it is not usable. Three of them cited three different top-end investment figures for the same brand. One publishes an identical royalty range, word for word, across unrelated brands. Two of them flatly contradict each other on whether a major brand makes an earnings claim at all. Those sites are paid to place franchisees. They are not reading the filings, and neither should you read them.

The cap is per agent, not per office, and it can be taken away

Here is the number every Keller Williams recruiting conversation reaches within a few minutes: 6% of gross commission income, capped at $3,000 a year.

The filing says that. It also says two things that change what it means.

First, the cap is per Associate, not per office. Each individual agent's royalty contribution stops at $3,000 a year. Your Market Center's total obligation does not stop anywhere. A twenty-agent office does not hit a cap at $3,000, or at $60,000, or at any office-level number, because there is no office-level cap in the document. This is a materially different structure from the one the phrase "capped at $3,000" suggests to most people hearing it, and it is the single easiest thing to misunderstand in the whole agreement.

Second, the cap is the franchisor's to change. Item 6 reserves the right to raise it to $4,000 per Associate, and separately reserves the right to eliminate the cap entirely at the franchisor's discretion. The ceiling you are shown is not a term of the deal in the way a buyer usually means that word.

Then there is a floor. The filing's own Special Risks section states:

You must make minimum royalty or advertising fund payments, regardless of your sales levels.

We could not locate the specific dollar amount of that minimum in the sections we extracted, so we are not going to print one. But note the shape of it: a per-agent ceiling that the franchisor may raise or remove, sitting above a floor you owe whether or not you sell anything.

The recurring charges stack from there. An Associate Technology charge of $65 per agent per month, which Item 6 permits rising to $150. A G Suite line at $5 per agent per month, permitted to rise to $10. A marketing development line at $83.33 a month, permitted to rise to $150. A $250 technology connection charge and an operating software licence up to $1,500. Nearly every line in Item 6 carries the franchisor's right to adjust it upward at their sole discretion.

Which means today's schedule is the floor of what you will pay across a multi-year term, not the ceiling.

For what it is worth against your own model, we covered what brokerages pay their agents in commission splits and the ground-up line items in what it costs to start a brokerage.

Your website needs written approval, and the domain may not be yours

This is the part almost nobody reads, and for a business whose entire storefront is a website it is the part that decides the most.

Item 11 reserves the brand's domains to the franchisor and then says this about yours:

You must obtain our prior written approval for any domain name or URL you or your Associates propose to use in connection with the operation of your Market Center. The form, content and appearance of your website must comply with the standards listed in the Brand Standards Manuals and must be approved by us in writing before you post the website on the internet.

So a franchisee may have a website, but the domain needs approval, the design needs approval, and the approval is in writing and in advance. In the attached franchise agreement there is a further provision: at the company's option, the domain name, URL or social media account is to be registered in the company's name rather than the franchisee's.

Read that twice. Not licensed to the franchisor. Registered to them, at their option.

And on the way out, Item 17 and the agreement together:

Upon termination or early expiration of the Franchise Agreement, the domain name agreement will automatically terminate, and you and your Associates must use best efforts to undertake all actions that we require to dissociate from the website and the domain name.

Plus the de-identification obligation:

You must cease operating the Market Center and stop using the Trademarks, Brand Standards Manuals and System, and completely de-identify the business.

We did not find a stated grace period for that in the sections we read.

Put the three together and the position is clear enough. Under this agreement your website is an asset of the relationship, not an asset of your business. The address people have been typing for years, the pages that rank, the accumulated search history: none of it is straightforwardly yours to carry out the door. This is the single largest practical difference between the two paths in this whole document, and it is the one that never appears in a comparison chart.

You do not get an exclusive territory, and they may recruit inside it

Item 12 opens with the exact sentence the Federal Trade Commission prescribes when no exclusivity is granted:

You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.

There is a real protection underneath it, and it is worth having: while you are in full compliance, the franchisor will not operate or authorise another bricks-and-mortar Market Center inside your Awarded Area. That is not nothing.

But look at what the franchisor expressly reserves inside your area. The right to advertise and promote the brand there. The right to solicit and accept listings there. The right to operate temporary new-home sales locations there. The right to offer competing services under other names and marks from locations inside it. And this one:

The right to recruit brokers and agents from within your Awarded Area.

None of it carries compensation to you.

If you have read our piece on recruiting agents to a new brokerage, you know that recruiting is the actual work of building a firm, not a side effect of having one. An agreement that reserves the franchisor's right to recruit inside the area it just protected you in is worth understanding before you sign it, not after.

Leaving costs you two years and ten miles

This is the clause we would want a broker to see before anything else in the document.

From section 17.02 of the franchise agreement, the covenant runs for two years from the earlier of termination, cancellation, expiration or transfer of the franchisee's interest, and during it neither the franchisee nor any of its principals may:

Own, maintain, operate, engage in, or have any interest in any real estate brokerage business that is located (i) in the Awarded Area; (ii) within 5 miles of the Awarded Area; or (iii) within a 10-mile radius of any other Market Center in existence or under construction

Three things about that.

It is two years. Not ninety days.

The geography is larger than your territory. Your Awarded Area, plus five miles around it, plus a ten mile radius around every other Market Center that exists or is under construction. In a metro with several offices, those circles overlap into something much bigger than the area you were operating in.

It triggers on expiration, not just termination. The clause names "termination, cancellation, expiration or transfer". You do not have to be thrown out or walk away angry. Reaching the end of a term and choosing not to renew starts the same two year clock.

So the exit is not simply a matter of taking your sign down. Under this agreement, deciding a franchise is not for you means either leaving the business for two years or leaving the area.

Item 19: they will not tell you what one earns

Item 19 of a franchise disclosure document is where a franchisor may state what its outlets actually make. Making that statement is optional. The Federal Trade Commission's own guidance is explicit that the Franchise Rule does not require one.

Keller Williams declines. From Item 19, page 73:

We do not make any representations about a franchisee's future financial performance or the past financial performance of company-affiliated or franchised outlets. We also do not authorize our employees or representatives to make any such representations either orally or in writing.

That is the disclaimer the FTC prescribes for franchisors who choose not to make a claim. It is entirely lawful, it is common across franchising generally, and it is not evidence of anything being hidden.

It is still worth sitting with. The company asking you for $35,000 up front and 6% of every commission will not put its name to a number about what one of its offices earns. It is permitted to. It has the data. It chose not to, and the document says so in the words the regulator wrote for exactly that choice.

There is a reason beyond candour, and being fair about it matters: a franchisor that makes no earnings claim cannot later be sued for having made a misleading one. Declining Item 19 is a defensible legal posture, not a confession. But the effect on you is the same either way. Whatever number you have in your head about what a Market Center makes, you did not get it from the franchisor, because the franchisor did not provide one.

We could not verify Item 19 for any of the other seven brands. One referral site claims RE/MAX makes an earnings representation and another claims it does not. We are not repeating either, because neither of them read the filing and neither did we.

The system is shrinking, and nothing is waiting to open

Item 20 is where a franchisor discloses how many outlets opened and how many left. This is the least discretionary part of the document, because the counts have to tie back to real signed and terminated agreements.

Franchised Market Centers, from the April 2025 filing:

Thirty-two fewer franchised Market Centers at the end of 2024 than at the start of 2022, in a period when 31 opened. Run the arithmetic on each year and roughly 63 Market Centers left the system across those three years against those 31 openings. About two out for every one in.

Systemwide, counting company-affiliated offices alongside franchised ones, Table 1 shows 826 at the start of 2023 falling to 773 at the end of 2024.

Then the number that stopped us. Table 5 discloses projected openings, and as of December 31, 2024 the filing records zero signed franchise agreements for Market Centers not yet open, and zero projected new Market Centers for the following year, as a national total. Not a small number. Zero.

One caution, and it is the franchisor's own. A footnote warns that the counts here may not reconcile with those in previous years' filings because the method of counting changed, from date of agreement to approved-and-opened. We will add a caution of our own: we could not make the individual exit categories in the table (terminations, non-renewals, reacquisitions, other closures) sum to the year-end totals the same table reports. The start and end counts chain correctly year to year and are corroborated by Table 1, so we are confident in the trend and in the totals. We are not printing a breakdown we cannot balance.

Does the brand actually sell houses for more?

This is the thing the brand is supposed to buy you, and the evidence is thinner than either side of the argument admits.

The most-cited academic paper on franchise affiliation in brokerage is Jud, Rogers and Crellin's 1994 article in the Journal of Real Estate Finance and Economics, which sets out to examine the value of franchise affiliation to brokerage firms. We could not read it. It is behind a publisher paywall with no open-access copy, no repository mirror and no working-paper version we could find, and its abstract does not state the sample size or the size of the effect. It has been cited for thirty years by people who could get past the paywall, into an industry where almost nobody can.

The most recent peer-reviewed study aimed directly at this question is Locke's 2020 article in the same journal, and its title is Paying for a Name? Comparing the Performance of Franchised Real Estate Brokerage Firms. That is precisely the question a broker is asking. It is also paywalled, and we are not going to characterise findings we have not read.

What we could read in full is a 2014 working paper using Northeast Florida MLS data: 58,603 residential sales in Duval County between January 2008 and December 2013. Controlling for interior and exterior property characteristics, location, waterfront access, historic designation, cash purchases, days on market, year and quarter, and the transaction volume of both firms involved, it found that a listing brokerage affiliated with a national franchise was associated with a sale price about 1.9% to 2.2% lower, significant at the 1% level.

Label that properly. It is a working paper, not a peer-reviewed article. It is one county across six years. It does not control for individual agent experience, only for firm transaction volume. It is one piece of careful evidence, not a verdict.

But it is the most detailed public analysis of this question we could actually obtain and read, and it points the opposite way from the pitch. Its authors say as much, noting their result runs against most of the earlier published work while matching a 2013 study of Chatham County, Georgia that also found a negative association.

So the honest summary: the older literature leaned neutral to positive, the two most recent studies anyone can read found a small negative, the most recent peer-reviewed work is locked up, and no study in any of it controls for how experienced the agent was. If someone tells you the brand sells houses for more, ask which study. There may not be one they can hand you.

How to pull the filing for whatever brand you are considering

This is the part worth keeping, because it works for any brand, not just this one.

Federal law requires a franchisor to give you a Franchise Disclosure Document before you sign anything. Several states require it to be registered with them, and some of those states publish what gets filed. Four we confirmed are free and need no account:

Two practical notes. Search the legal entity name, not the brand: the document we read is filed by Keller Williams Realty, LLC. And a brand only appears if it is currently registered in that state, so not finding it in one portal does not mean no document exists. Try another.

When you have it, these are the items worth your afternoon:

• Item 5 and Item 6. What you pay to sign, and everything you pay after. In Item 6 look specifically for whether a cap is per office or per person, whether the franchisor may raise or remove it, and whether there is a minimum you owe in a month where you sell nothing.
• Item 11 and Item 17. Your website, your domain, your technology obligations, and what happens to all of it when the agreement ends.
• Item 12. Whether the territory is exclusive, and what the franchisor reserves the right to do inside it.
• Item 17 again. The post-term covenant. How many years, how many miles, and whether it triggers on simply not renewing.
• Item 19. Whether they will tell you what an outlet earns.
• Item 20. How many opened, how many left, and whether anything is signed and waiting to open.
• The exhibit list at the back. Item 20 requires a list of current franchisees and, importantly, franchisees who left in the last year, with contact details. Those are the calls to make.

That last one is the highest-value thing in the whole document and it is the one nobody uses. The franchisor is legally required to hand you the phone numbers of people who quit.

Six questions before you sign

1. Is the cap per office or per person? If it is per person and you plan to grow, you have no cap. Model it at the agent count you actually intend to reach, not at one.

2. Can they change it? Find the sentence that reserves the right to adjust. Then price the agreement at the ceiling the document permits, not at today's number.

3. Who will own your domain? If the answer is the franchisor, or the franchisor at their option, then the address your listings and your reputation accumulate under is not an asset you are building. Decide whether you are alright with that, in advance, in writing.

4. What does leaving cost? Read the post-term covenant and put a compass on a map. Two years and ten miles from every office in your metro is a different proposition than a ninety day cooling-off period, and you are agreeing to it on day one.

5. Will they tell you what one earns? Turn to Item 19. If it declines, that is lawful and normal, and it also means every earnings number you have been given came from a conversation rather than a document.

6. Are you buying the brand, or the systems? These are separable and they are worth different amounts. Training, back office and a recruiting story are real things a franchise supplies. A price premium on listings is the one thing the published evidence does not support, and it is usually the one doing the persuading.

The document is free and almost nobody reads it

Both sides of the franchise argument are selling. The trade association's own franchise report says its numbers came from the companies and were not checked. The referral sites contradict each other on basic facts about the same brand. The academic work that would settle whether the brand pays is thirty years old, paywalled, or unpublished.

And underneath all of that sits a 491 page document the franchisor was legally required to write, filed with state regulators, published free, that says what you will pay, what you will own, what you may not do afterwards, and how many people left last year.

We are not going to tell you that a franchise is the wrong answer. For a broker who wants training, a back office and a recruiting story on day one, it may well be the right one, and this post has not measured that either. What we will say is that the decision is knowable to a degree almost no other decision in this business is, and that the knowledge is sitting in a public database costing nothing.

Read the contract. Then decide.

If you go independent, the thing you own instead of a brand is your own name and the address it lives at. That part is ours: live before you open, yours to keep, priced in the open. And if you are still upstream of this decision, we wrote about whether to open a brokerage at all first.