NextHome Franchise Worth It in 2024?
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.
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.
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.
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.
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.
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.
(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.
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.
