Published on 21 Feb 2023 Time 10 min read Last update by 14 May 2024

NextHome Franchise Worth It in 2024?

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NextHome is a well-known real estate franchise that has been providing services for many years. With a focus on innovation and technology, NextHome has established a reputation for being at the forefront of the Real Estate industry. The company has a network of experienced real estate agents and professionals. They work together to offer a range of services designed to make the home buying and selling process as smooth and stress-free as possible.

After co-founding NextHome in 2014, James Dwiggins, along with Tei Baishiki, launched the company as an independent national real estate franchise. This happened in January 2015. Before NextHome, James and Tei cofounded VREO, Inc. Which developed pioneering enterprise-level internet applications for agents and brokers, and USA Virtual Tours, which was later acquired in 2001.

James is a third-generation real estate professional. Following in the footsteps of his grandparents, parents, and siblings. His extensive experience in the real estate franchise business began when he joined Realty World Northern California & Nevada in 2006. As the director of technology and strategy, he was later promoted to vice president. In May 2014, he left Realty World and cofounded NextHome with Tei.

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NextHome Opportunity

NextHome offers a unique business opportunity for individuals who are looking to enter the world of real estate. Or to take their existing real estate business to the next level. The company provides its franchisees with a wide range of support and resources, including marketing materials, training programs, and access to innovative technologies and tools. With NextHome, franchisees have the ability to tap into an established brand and network while also having the freedom to run their business in the way that best suits their needs and goals.

The franchise also won the Best in Category Satisfaction Award by Franchise Business Review.

How Is NextHome Franchise Positioned in the Real Estate Industry?

The American Real Estate industry is a vast and dynamic market that plays a significant role in the overall economy. According to the National Association of Realtors (NAR), the Real Estate industry contributes over $1.7 trillion to the U.S. economy. And employs over 2 million people. In addition, the residential real estate market alone was estimated to be worth over $31 trillion in 2020.

The Real Estate industry is constantly evolving. With new technologies and innovative business models disrupting the traditional real estate landscape. In recent years, the rise of online real estate platforms and the increasing popularity of iBuying have transformed the way that homes are bought and sold. Despite these changes, traditional real estate agents and brokers remain a vital part of the industry. With over 2 million real estate licensees in the U.S.

The U.S. housing market has experienced significant growth in recent years. With the median home price has increased by over 5% from 2019 to 2020 according to the NAR. This growth was driven by a combination of factors, including low mortgage rates, a strong job market, and increasing demand for housing in certain markets.

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How Much Is a NextHome Franchise?

The initial NextHome Franchise Fee is $4,500 for a 1-year agreement or $8,750 for a 5-year agreement. You have to pay this upfront fee when opening a NextHome franchise.

NextHome Franchise Cost

The estimated total investment necessary to begin the operation of a NextHome Franchise ranges from $16,250 to $220,345. The following costs are part of the upfront costs included in the initial investment for a NextHome. Many of these are one-time fees that you need to pay to launch the franchise. Review the chart below to see how much it costs to buy a NextHome franchise in 2022.

Type of expediture Amount To Whom Payment Is to Be Made
Initial Franchise Fee $4,500 for a 1-year agreement or $8,750 for a 5-year agreement Us
Office Lease Usually between $1.50 and $2.00 per square foot per month Landlord or sublessor
Construction, remodeling and leasehold improvements $0 to $50,000 Architect, interior designer, landlord, general and other contractors
Equipment, computers, decor, furniture, fixtures, decorations, etc $500 to $25,000 Supplies of furniture, fixtures, computers, equipment, etc
Office supplies, brochures, stationery, etc $500 to $4,000 Vendors
Signs $1,000 to $4,000 Sign suppliers
Security deposits, utility deposits, business licenses and other prepaid expenses $500 to $3,500 Landlord, utility companies, government agencies, etc
Insurance $1,500 to $10,000 Insurance agent or carrier
Dues, licenses and permits $1,000 to $4,095 National Association of REALTORS, government agencies and other professional associations you join. If you sign the Casan Collection Addendum, the high range includes $495 to cover the current cost of membership with the Institute 1 for Licensed Associate
Other pre-opening expenditures $1,000 to $5,000 Attorney, accountant and other providers
Additional funds required before opening and during the initial 3 to 6 months of your business operation $5,000 to $100,000 Working capital, ongoing expenses, etc
Total Investment $16,250 to $220,345

Ongoing Fees

Base Franchise Fee: $125 per month

Non-Team Royalty Fee: For each Licensed Associate affiliated with your Office who is not a member of a Team (as defined below): (a) 6% of your Adjusted Gross Income from the Licensed Associate (“Percentage Plan”); or (b) a flat monthly fee (“Flat Fee Plan”) of (i) $210 if you have a 1-year term, or (ii) $200 if you have a 5-year term.

Team Royalty Fee: For each Team affiliated with your Office: (a) $125; and (b) for each Licensed Associate on that Team, (i) $120 for a 1-year term, or (ii) $100 for a 5-year term.

Technology Fee: For each side of a transaction closed by your Office (i.e., buyer and/or seller representation), $90 if you have a 1-year term or $80 if you have a 5- year term.


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How Much Do NextHome Franchise Owners Make?

NextHome does not disclose franchise financials and instead states: “The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets if there is a reasonable basis for the information and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor’s management by contacting James Dwiggins, NextHome, Inc., 4309 Hacienda Drive, Suite 110, Pleasanton, CA 94588, 855-925-6398, the Federal Trade Commission and the appropriate state regulatory agencies.”

Based on royalties of $7,214,946 in 2022 and a royalty fee of 6%, we estimate an Average Unit Volume of $208,403.

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2022 NextHome Franchise Sales: $208,403

Initial investment (midpoint) %Profit margin of median franchise sales Estimated Profits Time to recoup investments
$118,297 10% $20,840 7 years
15% $31,260 5.25 years
20% $41,680 4.5 years

Based on the median sales provided by NextHome’s franchise locations, at an average of a 15% profit margin it will take around 5.25 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 15% profit margin, which would elongate getting a return on your investment.

Many factors affect the sales, costs, and expenses of your Franchised Store, such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace; the presence of other Real Estate stores; and the extent of market penetration and brand awareness that NextHome stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.

Is the Franchise Profit Worth the Franchise Cost?

To assign a valuation multiple for NextHome franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.

Under $5 Million Net Sales

  • Estimated Selling Price = Net Sales * 0.83

When you go to sell a NextHome franchise based on the median multiple of .83 and net sales in 2022 of $208,403, it would sell for $172,974. This would recoup your initial investment of $118,297.

The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.

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How Many NextHome Units Have Opened and Closed?

Year Outlets at the Start of the Year Outlets at the End of the Year Net Change
2020 357 437 +80
2021 437 512 +75
2022 512 577 +65

The numbers suggest that the number of NextHome franchises increased by 80 units in 2020, 75 units in 2021, and 65 units in 2022.

This shows a consistent growth trend for NextHome franchises over the three-year period. Although the rate of growth slightly slowed down from 2020 to 2022. This could be due to various factors such as market competition, economic conditions. Or changes within the company.

It’s important to note that these numbers only provide a snapshot of the growth of NextHome franchises. And should be considered in the context of other relevant information and data. For example, the financial performance of individual franchises, the level of support and resources provided by NextHome, and the overall state of the Real Estate industry could also play a role in the growth.

In conclusion, the growth of NextHome franchises as indicated by these numbers is a positive trend, and the consistent growth over a three-year period suggests that the company is well-positioned to continue to succeed in the Real Estate industry.

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(Franchisor) Income Statement Key Insights

2022 2021 2020
Revenues
Royalty fees 7,214,946 6,246,181 5,001,314
Technology fee and advertising fund, net of discounts 2,725,320 2,678,442 2,078,604
Conference sponsorships and tickets 1,228,602 155,383 701,027
Service fees 233,806 142,976 74,959
Initial franchise fees 443,463 388,283 491,063
Franchise renewal fees 218,967 192,960 194,415
Franchise transfer fees 22,945 24,024 33,150
Other income 295,493 281,449 204,612
Total revenues 12,383,542 10,109,698 8,779,144
Operating expenses:
Compensation 6,760,340 5,316,205 4,518,174
Professional services 502,836 665,244 594,592
Depreciation and amortization 120,125 119,294 150,236
Interest expense 40,935 49,646 70,203
Selling expenses 773,017 596,027 479,856
Occupancy 404,939 368,566 351,561
Administrative 4,378,967 2,438,683 2,117,714
Bad debts 36,675 24,448 6,410
Total operating expenses 13,017,834 9,578,113 8,288,746
Other income (expense):
Stock-based compensation (31,574) (2,768)
Legal settlements (2,500)
Forgiveness of PPP Note 533,518
Interest income -52,785 4,278 3,381
Realized losses on investments (43,005)
Gain on sale of property and equipment 18,035 16,758
Loss on disposal of intangibles (441,121)
Total other income (expense), net (3,759) 554,554 (443,008)
Net income (loss) before income taxes (638,051) 1,086,139 47,390
Income tax benefit (expense) 192,227 (279,535) (80,899)
Net income (loss) (445,824) 806,604 128,289

NextHome’s franchisor incurred a loss of $445k in 2022, which is a drop from a profit of $806k in 2021 and $128k in 2020.

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Summary

NextHome is a real estate franchise that provides a range of services to clients and franchisees. The American Real Estate industry is a dynamic market that is constantly evolving. With new technologies and innovative business models disrupting the traditional real estate landscape.

The growth of NextHome franchises is a positive trend. And the consistent growth over a three-year period suggests that the company is well-positioned to continue to succeed. However, individual franchisees’ financial performance and other factors such as market competition and economic conditions should also be considered.

While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Real Estate industry.

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