XML 51 R19.htm IDEA: XBRL DOCUMENT v3.25.0.1
Franchising and Marketing Activities (Notes)
 12 Months Ended
Dec. 31, 2024
Franchising and Marketing Activities [Abstract]  
Franchisors [Text Block] FRANCHISING AND MARKETING ACTIVITIES
Domestic franchisee agreements generally require the franchisee to pay the Company an initial franchise fee for the franchisee's principal office plus a royalty fee that is a percentage of gross commission income, if any, earned by the franchisee. Franchisee fees can be structured in numerous ways. The Company utilizes multiple franchise fee models, including: (i) volume-based incentive (under which royalty fee rate is subject to reduction based on volume incentives); (ii) flat percentage royalty fee (under which the franchisee pays a fixed percentage of their commission income); (iii) capped fee (under which the franchisee pays a royalty fee capped at a set amount per independent sales agents per year); and (iv) tiered royalty fee (under which the franchisee pays a percentage of their gross commission income as a royalty fee). The volume incentives currently in effect vary for each eligible franchisee for which the Company provides a detailed table that describes the gross revenue thresholds required to achieve a volume incentive and the corresponding incentive amounts and are subject to change.
Domestic initial franchise fees and international area development fees were $5 million, $5 million and $4 million for each of the years ended December 31, 2024, 2023 and 2022, respectively. Franchise royalty revenue is recorded net of annual volume incentives provided to real estate franchisees of $46 million, $43 million and $61 million for the years ended December 31, 2024, 2023 and 2022, respectively.
The Company’s wholly-owned real estate brokerage services segment, Owned Brokerage Group, pays royalties to the Company’s franchise business; however, such amounts are eliminated in consolidation. Owned Brokerage Group paid royalties to Franchise Group of $304 million, $301 million and $358 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Marketing fees are generally paid by the Company’s real estate franchisees and are generally calculated based on a specified percentage of gross closed commissions earned on real estate transactions, and may be subject to certain minimum and maximum payments. Brand marketing fund revenue was $75 million, $82 million and $89 million for the years ended December 31, 2024, 2023 and 2022, respectively, which included marketing fees paid to Franchise Group from Owned Brokerage Group of $15 million, $14 million and $15 million for the years ended December 31, 2024, 2023 and 2022, respectively. As provided for in the franchise agreements and generally at the Company’s discretion, all of these fees are to be expended for marketing purposes.
The number of franchised and company owned offices in operation are as follows:
 
(Unaudited)
As of December 31,
 202420232022
Franchised (domestic and international):
Century 21®
10,986 11,972 13,611 
ERA®
2,291 2,395 2,407 
Coldwell Banker®
2,145 2,140 2,100 
Coldwell Banker Commercial®
208 189 171 
Sotheby’s International Realty®
1,065 1,071 1,035 
Better Homes and Gardens® Real Estate
386 440 418 
Corcoran®
124 96 82 
Total Franchised17,205 18,303 19,824 
Company owned:
Coldwell Banker®
506 551 606 
Sotheby’s International Realty®
44 44 44 
Corcoran®
25 28 29 
Total Company Owned575 623 679 
The number of franchised and company owned offices (in the aggregate) changed as follows:
 
(Unaudited)
For the Year Ended December 31,
 202420232022
Franchised (domestic and international):
Beginning balance18,303 19,824 20,355 
Additions403 571 548 
Terminations(1,501)(2,092)(1,079)
Ending balance17,205 18,303 19,824 
Company owned:
Beginning balance623 679 675 
Additions1 5 46 
Closures(49)(61)(42)
Ending balance575 623 679 
As of December 31, 2024, there were an insignificant number of franchise agreements that were executed for which offices are not yet operating. Additionally, as of December 31, 2024, there were an insignificant number of franchise agreements pending termination.
In order to assist franchisees in converting to one of the Company’s brands or as an incentive to renew their franchise agreement, the Company may at its discretion, provide incentives, primarily in the form of conversion notes or other note-backed funding. Provided the franchisee meets certain minimum annual revenue thresholds during the term of the notes and is in compliance with the terms of the franchise agreement, the amount of the note is forgiven annually in equal ratable amounts generally over the life of the franchise agreement. If the revenue performance thresholds are not met or the
franchise agreement terminates, franchisees may be required to repay a portion of the outstanding notes. The amount of such franchisee conversion notes or other note-backed funding was $164 million and $174 million at December 31, 2024 and 2023, respectively. These notes are principally classified within other non-current assets in the Company’s Consolidated Balance Sheets. The Company recorded a contra-revenue in the statement of operations related to the forgiveness and impairment of these notes and other sales incentives of $35 million, $34 million and $45 million for the years ended December 31, 2024, 2023 and 2022, respectively.