The Wall Street Transcript Interview with Margaret Kelly, Chief Executive Officer and Director of RE/MAX Holdings, Inc. (RMAX)

Wall Street Transcript

67 WALL STREET, New York - February 20, 2014 - The Wall Street Transcript has just published its 2013 IPOs Report offering a timely review of companies new to the stock market. This special feature contains expert industry commentary through in-depth, detailed interviews with CEOs and senior executives of new public companies. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Initial Public Offerings - IPOs

Companies include: RE/MAX Holdings, Inc. (RMAX) and many others.

In the following excerpt from the 2013 IPOs Report, the Chief Executive Officer and Director of RE/MAX Holdings, Inc. (RMAX) gives a detailed strategic plan for her company for investors:

TWST: I'd like to begin with a brief overview of RE/MAX's business.

Ms. Kelly: RE/MAX is 40 years old, and we are a franchise organization that happens to be in the real estate business. To give you an idea, we have about 6,400 offices in nearly 100 countries, and of the 6,400 offices, only 21 are company-owned. I like to stress a point that we truly are a franchised organization because the majority, if not all, 99.9% of our offices are independently owned.

The different concept of RE/MAX and the way we approach business was to give more control and more entrepreneurial opportunities to both our franchisee and to the agents they recruit. In traditional real estate companies, the broker - the owner of the office - is the one who controls what commission an agent can charge, what kind of personal promotion they can do, what kind of training they can get, and for that type of control, they usually get 50% of the commission that the real estate agent earns. At RE/MAX, we look at that and say, "No, we want that entrepreneurial environment where agents can set their own commissions, can do as much education and training that they want - that's up to them - their own personal promotion, and our commission split is 95% goes to the agent and 5% goes to the broker." So it's a high-commission concept with freedom to build your business.

Consequently, the broker runs their office like a law firm or like a doctor's office, where all of the expenses of the office are actually co-oped and shared between the agents. So they're predictable, they know what their fees are, and consequently the more business an agent does, the more actual money they make, because for the most part, their expenses are predictable and fixed. It really entices the more experienced agent to come to RE/MAX.

TWST: Does that mean you also have a higher retention rate of agents?

Ms. Kelly: It's hard to look at retention rates. We know what our churn rate is. We look at that compared to the National Association of Realtors. But we roll all agents into our calculation - they only take agents who have been with them more than so-many years - but our retention is good. To give you an idea, on average in the RE/MAX system and the RE/MAX network, our agents have eight years tenure with RE/MAX and over 13 years experience in real estate. So we don't have all beginners out there. Because of the co-ops, because of the co-op expenses that they share, you really need to be someone who has business, because when you join RE/MAX, your first month you've got to bill out your co-op office expenses. And so that attracts more of the experienced agents.

TWST: Where are the growth areas that you're focused on today? Where do you see that coming from?

Ms. Kelly: We look at it across the board. Obviously, we are very strong in the United States and in Canada. We're strong in South Africa and the Caribbean, Spain. We, just a year ago, sold the master franchise rights to China, and actually, just a month ago, we sold the master franchise rights to Japan. I'm heading to Japan tomorrow to assist them in their grand opening of RE/MAX Japan.

We have three growth factors...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.


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