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In the past 10 years or so, we’ve witnessed a transformative period in auctioneering — in many ways. One way is that more and more auctioneers are becoming affiliated with larger auction groups or associations, and/or purchasing an auction/auctioneer franchise.
First, some terminology. In a franchise arrangement, the (typically) local auctioneer becomes a franchisee by buying a franchise from a (typically) regional or national auctioneer franchisor.
One of the first successful American franchising operations was started by John S. Pemberton. In 1886, he concocted a beverage comprising sugar, molasses, spices, and cocaine; Pemberton licensed selected people to bottle and sell the drink, which is now known as Coca-Cola. His was one of the earliest, and most successful, franchising operations in the United States.
Some examples of such auction/auctioneer franchisors, or the like, are:
- United Country, Kansas City, Missouri
- Tranzon LLC, Portland, Maine
- MarkNet Alliance, Nokomis, Illinois
The advantages of franchising for an auctioneer include:
- A proven brand; proven idea. The franchisee can immediately gain creditability and brand recognition associating with a known franchisor.
- Support and training. The franchisee can receive training from the franchisor and support in regard to forms, website, procedures, laws and regulations, etc.
- Exclusive rights. In many cases, a franchisee purchasing a franchise can have exclusive rights to a geographic area or territory, thus not having to compete with similar franchisees in their market.
- Referrals. Normally, inquiries to the corporate franchisor are then referred to franchisees in the local market.
- Benefits. In some cases, a franchisor offers franchisees other benefits including health insurance, E&O insurance, extended legal support, other discounts, etc.
- Financing. It may be easier for a franchisee to obtain financing from a lender, or via the franchise, for needed projects.
- Other franchisees. A franchisee can be helped by other successful franchisees in nearby or even distant markets.
The disadvantages of franchising for an auctioneer include:
- Intial cost. There are typically fees the franchisee must pay the franchisor up-front. These costs may be upwards of $10,000. In contrast, a McDonald’s franchisee might pay upwards of $500,000 in initial costs.
- Ongoing cost. Normally, a franchisor will demand the franchisee pay a percentage of all gross profits to them on a monthly, quarterly, and/or annual basis. Too, supplies, signage, and other items may cost more because of franchisor restrictions on color, brand, logo, etc.
- Restrictions. Once the franchise agreement is in place, the franchisee will be restricted to conduct business in a certain manner. For instance, an auctioneer may have to always have certain signs in place, use certain forms, report results within a certain time frame, etc.
- Other franchisees. A franchisee can be hurt by other unsuccessful franchisees in nearby or even distant markets.
- Franchisor health. If the franchisor gets in financial trouble, or goes out of business, the value of the franchise can be adversely affected, and/or become difficult to sell.
We pictured Tip O’Neill at the top of our story here for a reason. Tip was famous for saying many things, but maybe most famous for saying, “All politics are local.” Possibly, the same could be said for auctioneers? Maybe “all auctioneers are local?”
Could it be that a local auctioneer, with ample resources available to him or her, such as a website, AuctionZip, local MLS, television, radio, newspaper, etc. could do just as good of job (or maybe better) preparing, managing, conducting and settling an auction as someone who has franchised with a larger company?
This will be an interesting trend to watch.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He is Executive Director of The Ohio Auction School.