The rise of Re/Max - real estate franchise Re/Max International Inc - company profile

Nation's Business, April, 1990 by Roger Thompson

The Rise Of Re/Max

Dave Liniger is on the move - as usual. He and his wife, Gail, are cruising down Interstate 225 in their Jeep 4x4 on their way to Denver airport - a frequent destination for a couple that spends more than 200 days a year on the road.

They're off this time to Las Vegas for the opening of a new Re/Max franchise. Office No. seventeen-hundred-and-something. It's hard for the chief executive officer and the president, respectively, of Re/Max International Inc., the fast-growing residential-real-estate franchising company, to keep track these days. On average, about four new offices open every week somewhere in the U.S. or Canada, and they'll soon start popping up in Australia.

Liniger is raring to tell his "ultimate, all-time-great hunting story" about the leopard that almost ate him, but first he has to attend to a bit of business. He uncradles the car phone and returns a stock broker's cold call.

The broker is related to a Re/Max agent and figured Dave and Gail could use a little portfolio management. Liniger politely declines, explaining that he and Gail, who own 97 percent of Re/Max, already employ financial advisers who have their affairs well in hand. "I've probably had 10 to 12 stock brokers call in the last week," Liniger says after the call. He declines to discuss the couple's considerable net worth: "We're a very privately held company."

Next, Liniger dials up his horse broker for an update on the latest potential acquisition. Dave and Gail, both 44, already own nine Arabian show horses, and they intend to double that number soon. The Linigers are building a second home near Santa Barbara, Calif., that will serve as a horse ranch and escape from their fast-paced lives.

Their ultimately escape - for which Dave almost paid the ultimate price - is big-game hunting in Africa. With the car phone back in its cradle, Liniger swings into his leopard story.

On safari in the Kalahari desert in southeastern Africa, Liniger wounded a leopard, provoking the beast to make a rare, lightning-quick, kill-or-be-killed charge for its pursuers. Liniger stood defenseless on the platform of his hunting truck, having had no time to reload his rifle. In seconds, the leopard was clawing its way up the side. Twice Liniger repelled the attacker with the butt of his gun. As he held the leopard at bay a third time, a professional hunter who was along for the ride felled the beast with a single point-blank rifle shot. As the leopard tumbled backward, Liniger fell out of the truck and landed on top of the fatally wounded animal.

Through it all, says Liniger, "there was no sense in panicking. There was no place to go."

That wasn't the first time that steady nerves in the face of enormous odds paid off for Dave Liniger.

He and Gail built Re/Max into a multibillion-dollar business because they simply refused to collapse under pressure. When bad luck, inexperience, and predatory competitors all but killed their fledgling company in the early 1970s, Dave and Gail never lost their resolve.

Today, in the field of residential real-estate franchises, Re/Max is No. 2 in the U.S., behind Century 21, and is No. 1 in Canada. By the end of 1989, Re/Max had 26,575 sales agents - one-third in Canada; they earned $1.96 billion in commissions, and they increased their sales volume by 23 percent over the previous year, to 589,834 transactions. Century 21's transactions last year declined slightly to 705,000 from 720,000 in 1988, according to a spokesman for the company.

Re/Max offers its franchisees a finely honed support system that includes custom-designed office computer software, national advertising that cost $121 million last year, and award banquets. But Re/Max's critical edge is a compensation concept that is simple yet so powerful that it has made the rest of the real-estate industry take notice.

While agents with traditional companies split their commissions on roughly a 50/50 basis with their broker/employers, Re/Max agents keep 100 percent of their commissions and pay monthly office overhead and franchise fees, which average $1,200 to $1,500. That means agents net about 85 percent of their commissions, says Liniger.

Because part-timers and low performers can't afford the monthly payments, Re/Max is a magnet for experienced agents who are confident of their abilities and eager to boost their net incomes. The average Re/Max agent in the U.S. earned $69,050 in commissions last year, 3.5 times the industry average of $19,000. One in four Re/Max agents grossed over $100,000.

Thus, in an industry where productivity - measured in numbers of transactions - is customarily low, Liniger has devised a compensation system that packs Re/Max with high-performance agents. And the home office in Denver lavishes support services on them.

The power of Liniger's compensation system "caught the traditional brokers sitting on their hands," says Steve Murray of Orlando, Fla., co-editor of Real Trends, a real-estate newsletter. "Up until about 1987, they tried to ignore him, and they got burned. They're not ignoring him any more."