The controversy over exclusive areas

One of the most notable features of the real estate industry is its meritocratic nature. Success comes a result of the sacrifices, hard work and decision making of individuals and organisations, rather than access to capital, perceived social standing or academic background.

Put simply, there are few barriers to entering this industry, at least to get started and to test one’s ability to make progress.

But it’s a brutal environment at times. Real estate agents who reach the status of legends can be cut down at the first sign of complacency or arrogance. Likewise, new entrants who underestimate the industry’s fundamental dynamics will quickly fail. Success is a genuine test of resilience and perseverance.

At the same time, when ambition, leadership, and pride in the service that is delivered to a local community are combined, wonderful things happen.

Instead of embracing these forces and the opportunities they provide, there are many in our industry who seek to control or change them. They seem to believe that through rules and regulations, contracts and covenants, they can alter the market’s fluid state to protect their position and create a safer place in which to exist.

One example of this is the concept of exclusive territories - something that’s become commonplace across many of the franchise groups in our industry. This rule dictates that specific suburbs can only be serviced by a particular office, thus creating a ‘patch’ in which that business solely determines what happens inside of it. Naturally, that business that has the exclusive access to those suburbs is also confined to operating only within them.

My father Brian has often told the story of a network meeting in the 1980’s when he announced the decision to remove exclusive territories. A big call as we were the first group to do so! “They won’t survive”, our competitors said confidently.

But to the contrary, enabling our members to pursue their full potential has been absolutely pivotal to our mutual success. You can’t encourage people to chase their full potential if you are holding them back. And equally, it doesn’t help anyone to create a false sense of security through building a barrier to other operators of the same brand, especially when there are much bigger threats to their success. Our responsibility is to challenge our members to be the hunter, not the hunted.

Our office locations are determined to ensure all leaders have the opportunity to build a business of genuine size. Of course, we believe that it is critical for every business to build strong market share in its core trade suburb and that it should not get distracted in other markets until it has done so. Our members should have strong local market knowledge if they are to represent customers in the sale of their property. With these principles in place, open trading has encouraged ambition and largely created healthy competition rather than hostility, ultimately delivering better outcomes for both Ray White members and our customers.

The application of restraints of trade on businesses and people is another example of such defensive attitudes. Unfortunately, people new to the industry often sign employment agreements without considering the restraint of trade clauses in them - and the same goes for new franchisees.

How often they can be surprised to find out later that if they want to pursue their career under another brand, they might have to sit out of the market for six months or longer! In some cases, they may even be required to assign the lease over their business premises to their former franchisor.

We have supported many who’ve joined us while they navigate their way out of these sorts of agreements, some of which have ended in serious litigation, seemingly akin to an indentured servant seeking their freedom.

It’s easy to imagine those who advocate for all these restrictions and limitations as ‘like a cage in search of a bird’. And in seeking to protect themselves, they miss the very basis on which they might have succeeded in the first place, and certainly the basis upon which they will need to succeed in the future.

Dan White - Managing Director