In our continuing series spotlighting our 2021 Best In Category Franchisee Satisfaction Award Winners, Franchise Business Review’s President & COO, Michelle Rowan sits down with James Dwiggins, CEO of NextHome. They discuss what NextHome did to transition in response to Covid and how they continuously engage with franchisees, which moved them to the #1 spot on our Top 200 Franchises list! They’ve been working with FBR since 2019, and they consistently score well in Franchisee Satisfaction; regularly an FBR Franchisee Satisfaction award-winner. Watch the video for the full interview. And there are some highlights from that conversation below the video.
Michelle Rowan: I am here with James Dwiggins, CEO of NextHome. First, I have to say congratulations. You guys are number one out of everybody on our 16th Annual Franchisee Satisfaction Awards. Congratulations!
James Dwiggins: Thank you on behalf of the whole team. We're very excited about it.
Michelle: You first made our list back in 2019. The first time out when you started with us, you guys were on the list. Then last year, you knocked some big real estate companies off the list ‑‑ Keller Williams, Sotheby's. You beat them all out and ranked best-in-category for real estate, and then this year, you're at the very top of everybody.
James: It's a surprise. I have to be honest. When we hit number one for our category last year, the team was excited. Obviously, we're all excited. Then it sunk in. When you're already at that point, you’ve got to do a damn good job to make sure you maintain that because you can only go down. You can't go up any further. Except we managed to pull it off across all brands. We're super excited about that.
Michelle: I love it. We always talk about how it seems so simple: that all it takes to be a really successful franchise brand is to have good unit‑level economics - setting realistic expectations with the people coming in and then treating everybody with respect and involving them in how you grow the business - but there's so many people that don't get that right.
I'm wondering, how do you use the people part...or is that your differentiator when you’re talking to candidates? How do you use that as the way you’re continuing to disrupt the real estate industry or how you’re doing business?
James: I would say roughly 40 percent of our growth is referral. That's a big number if you think about it, because franchising in general doesn't always have the best reputation. It depends upon the company. With us, it's a massive driver of our growth because the members are so happy. They go out and talk about the experience with other people within the market. When your franchisees...I hate the word franchisee - we call them NextHomies, just to be clear. When NextHomies get together, there's this very deep family culture within the company. They love what we've created because it's inclusive, but they're part of that. It's not just corporate. They're the ones driving the brand in a local market.
The more we do with them and the more we involve them in the direction of the company - taking their ideas, creating new swag material that they came up with - the more they drive that growth, and then expand the brand for us at the same time.
Everything you're going to hear me talk about comes back to very strategic decisions on who we bring in on the corporate team and the franchisee level as well. We're also screening to make sure the person that's going to be carrying the flag also fits the same culture that we are. We receive roughly 80 to 90 inquiries to franchise with us monthly. We take 8 to 10 of those.
You have to be really cautious about that too. You need to make sure that person is of the same mindset that you are because they're going to recruit people to the company that share the same philosophies.
I have this recruiting motto that we always teach. In real estate, obviously, agents drive the business. We tell our franchise owners, "Don't ever recruit somebody to your company that you wouldn't want to give up your Friday night to have dinner and drinks with."
It's funny because they look at you like, "Wait, what?" No, literally. If you wouldn't want to give up your Friday night to have dinner and drinks with that person, don't bring them into your company.
It's interesting how that has become a joke, but it's actually a philosophy that people follow. We find that it attracts like‑minded people to the business. Again, it flows all the way down the line to the buyer and seller.
You talked about disruption. I don't know if we're disrupting real estate as more of we're doing what we should have been doing in the past 50 years, which is being very strategic about what the home buyer and seller wants in a real estate experience.
You can create that experience if your agents ‑‑ I'm going to go a step further now in our line ‑‑ are also focused on what they want in an experience. It's not about the paycheck. The whole change in attitude from every line down the company will shift an organization.
The beautiful part is, to your question, it organically starts to grow itself. Like‑minded people will seek out your organization, which is why we've been able to grow as quickly as we have.
Michelle: Let's talk about COVID. A lot of businesses handled challenges very differently this year within franchising. Some are thriving while others are really struggling.
Can you talk about some of the biggest challenges that have had to overcome as an organization overall? Or more specific to your franchise partners, how you helped them address challenges that they were up against when all this rolled out this year?
James: Two things. I'll blend the two questions together. When COVID hit, of course, we were all like, "What’s going to happen here?" I will say that one of the great things about the leadership team that I have the pleasure of working with is we all just dig in.
We took a step back, and we're like, "All right, here's contingency plans, but let's make those contingency plans. What we need to do is lead our team and our company through this." We immediately shifted instantly to a remote workforce, obviously for health reasons. Second, we decided to get very aggressive with training and education with our membership.
The chief strategy officer, who I work very closely with, and I, were doing webinars every day for our franchise owners on: What is the government's policy here? What are the new guidelines being enacted by Congress? What is the PPP program? How can we make sure they can apply for it? What are some of the other federal programs?
We would literally dissect the information we get, host a webinar and show: Here's where you can borrow money. Here's the application. Here's how you can fill it out. Here's a local bank you can go through. We got aggressive from that standpoint.
Second, we got aggressive with having our agents be a voice for calm and trying to help people understand what’s happening, where housing’s going to shift. Fortunately for us, housing became one of the best industries to be in. I say that because we have been very fortunate as an industry.
Everybody was like, "If you're in a major city..." Nobody wanted to be in a major city anymore, so everyone was like, "I'm getting out." Housing went through the roof. Our industry has done very well from that perspective. The second question you were asking was…
Michelle: Well, your franchisees, were they facing any challenges, which I think you kind of covered with navigating this new idea around how is the government...what's available to help them.
James: There's that, but then we also face some challenges as an industry. How do you sell a house that requires buyers to come through it during a pandemic that nobody understands? How do you put a health and safety policy in place?
That was probably the biggest challenge we went through. How do I say this? Obviously, there tends to be two groups in the country right now. There's half the group that thinks COVID is real. There's the other half that isn't concerned with it.
It's not meant to be political. It is what it is. We're a national company. It was very difficult navigating putting a health and safety policy in place that was protecting the customer. We ended up doing it where we worked with counsel and we did enact a health and safety policy that all of our offices had to follow, which was controversial. It was, "You must be wearing PPE. You must apply PPE. You need to make sure disclosures are signed and waivers are signed before people come through the property." That doesn't go over very well in certain parts of the US that want to just be more hands‑off.
We also realized there were some significant challenges from an insurance side. Your general liability policy and your E&O policies don't cover pandemics. What happens if you bring a buyer through a property who has COVID? You didn't know. The seller gets sick. A family member dies. Everyone gets sued.
These are major things where we were going, “Whoa”, because there are no policies to cover that, which means the franchisee is left holding the bag to defend themselves. Obviously, in franchising, they're required to indemnify us. All of a sudden, it becomes a major issue.
There was a lot of navigating and working through helping educate people that this isn't about perception of mask or not mask. This is about a smart business decision. In the end, everybody rallied around the idea that it was about people. We need to protect our customers. We need to protect our clients. We need to make sure we're not spreading a disease any more than it already is.
Again, the culture came through. We ended up making the right decisions as an organization. That was a difficult thing to work through, especially with certain parts of the country dealing with massive breakouts of COVID and then others not even having a single case. It was a weird process to go through.
Michelle: The nature of a real estate agent is you want to meet the person where they are. You want to make sure they're comfortable, but there's the concern of alienating them by having the opposite opinion on masks, which has become such a big issue. Maybe there was some benefit of you guys putting that policy in place so they could go, "It's not us. It's them."
James: Totally. We even had the conversation with an agent about requiring waivers to be signed, which are fairly common in a lot of states like, "Have you had COVID? Have you been around somebody who's had COVID?" When the agent was like, "Nobody wants to sign it," we were like, "Well, if they don't sign that, they retain their right to sue you."
That conversation switched the training on that very quickly; that you need them to sign this to make sure you're not creating a liability. The point is we got hard and heavy on education. The team knew they could come to us to help navigate all of these challenges that no one in our company had ever faced, or anyone has ever faced. It was working through uncharted waters but we came out the other side. Ironically, we've had one of the best years we've ever had.
Michelle: You're making those decisions quicker than you normally would. It all happened so fast.
James: It was. It's been quick, but the thing was we made the decisions...We knew there was going to be pushback, but we made the decisions from the right place, which was coming from the safety of people.
Our members knew this wasn't a political play or anything. It wasn't about trying to make people wear masks or not, it was literally about needing to protect the people we serve, and so we got through a lot of those things by just approaching it with the right tone.
Michelle: You said something that stuck out, because I'm in complete agreement, that there's a lot of bad players in franchising, but also a lot of excellent franchise brands as well. This year, we're seeing more and more people who are looking at franchising as an opportunity because they have been put out of a job, or because they've decided they want to have more flexibility in their schedule or more control over their life.
Thinking about those people who might not be as familiar with franchising as you and I, what's some advice that you would give to people who are looking at franchise ownership as a way forward, and ways to navigate what's a good brand versus not a good brand?
James: I boil that down to two things. I had this conversation yesterday actually. The very first thing is to find something you're passionate about. Find an industry that you really think you can get behind and that gives you a sense of waking up every day and having purpose.
You have to love what you do. A job shouldn't be something you dread, and you want to get home at five o'clock. A job should have something you love about it, that you would want to spend 10, 12 hours away from your family in the beginning to be really proud of.
Research industries heavily that you think you can get behind. Then, the biggest thing between what I think successful franchises do, is spend a lot of time researching the leadership team of that franchise. I share that because, and I always say the analogy, "Franchising is a lot more like a marriage." You can get married very quickly, but divorcing is painful.
You need to be aligned with the leadership team. If their vision of where the company is going doesn't align with yours, or their philosophy on service, or if you're talking to other franchisees within the franchise and they're not ranked high on Franchise Business Review, or they don't even do it, which should be a red flag in my opinion, then those are things to really dig into.
I have seen really successful partnerships because the franchisee and the leadership team align on most things. You're not going to get it perfectly, but 90 percent is what you're looking for. Then things work out really well. Spend some time talking to past customers of the franchise.
This is one thing I could share about us: We know that the franchisees who are no longer with us, I guarantee you that if you call all of them even though they're not with us, they'll have nothing but positive things to say about our company.
That’s because it's not only how we treated them within the company, but also how we treated them even after they've left the company or were leaving the company for various reasons. It could be just life changes, or our visions didn't align.
That's a big thing to figure out, because if you call the customers that are no longer there, and they all have nothing positive to say, then it's usually a red flag about something that may not be right culturally within the organization.
What I love about franchising, and this is the thing that I would encourage everyone to look at: You either are going to reinvent something from scratch, which you can do, or you can cut out a lot of that, and really just figure out, here's a business that's doing really well. They figured out the processes instead of me having a headache trying to deal with all of the learning curve. Most of that is taken care of.
A good leadership team and a good franchise knows, already, how to take what they've created, and duplicate that, as well they've got a good operator operating the franchise.
Just because you franchise doesn't mean it's going to be a success. A lot of that comes down to your leadership ability, but the right franchise brand can do really well, which is why there are so many successful ones out there. Then ones that work, or aren't, or never really succeeded, most of the time, that comes down to, in my opinion, a leadership problem on the franchise level.
Michelle: That's great. Great advice there. I would also add, and what I love about franchising, is that when you have a good team that creates a model that's easy to duplicate, it's a level playing field. It doesn't matter your gender or the color of your skin. “Here's our playbook, and it's up to you to deliver on that.”
James: It's funny you mentioned that. When I talk about aligning goals, it's not just business goals, but how do you align with somebody on a moral and personal level. One of the things we're incredibly proud of is the diversity in the ownership group of our franchise. We seek that out. We try to be as diverse as this country is.
I share that because when you look at our senior management team, we are also diverse. It's important to us that we are a team that is representative of our company.
That's important too. Just because you have a great franchise brand, sometimes you may align from the business perspective, but then you might find out later you don't align when it comes to social issues or things that are important to you. Franchises have rules on some of this stuff. Sometimes they don't want you going out and taking a position on social issues.
I remember this year, obviously a lot of the things that have come up with George Floyd and others. It was amazing when we sat down and talked about how we wanted to respond to that. So many companies just do a boilerplate...they just write a boilerplate thing from counsel and they put it out there and it's supposed to be representative of the whole company.
We took a different approach. We said you know what? Our corporate team is diverse in both opinion, gender, ethnicity, etc. We said every single one of them can write their entire take on it, and we posted a blog post on behalf of our entire corporate team with lots of varying opinions as representative of who we were.
We found that that was a breath of fresh air for our franchisees. They were like, "You're courageous." They may have not agreed with everything, but everyone respected the fact that we didn't take the easy route.
We actually addressed the issues that we're facing as a country. I don't know, I personally think that's something that a lot of people feel is important to them.
Those things are difficult because the easy route is to say nothing. The hard route is to take your position. Again, I feel as a company when you are willing to do that, you show more character and you'll actually attract people that want to be part of that.
Michelle: We have an opportunity as a franchise industry to do more of that and have these conversations, so that's excellent. I love it. You said when you're talking to candidates, it's important for them to understand the leadership's vision for the future. Where do you see NextHome being in the next 10 years? What does your plan with real estate look like in the next 10 years?
James: We're very fortunate in that we're privately held where we make the decisions based upon what we think is most important for the company, and the almighty dollar is not the first decision. We've never sought out to be the biggest company.
We're trying to create a real estate experience where the buyer and seller get the professionalism, the branding, the advertising, and the experience they deserve in a real estate transaction. The most complicated and strenuous thing most Americans will go through in their life is to buy or sell a property. It's the single largest asset most Americans own.
There're a lot of challenges with our business. There are way too many agents that do not belong in the industry selling real estate. We continue to raise that bar by raising standards in our company. In real estate franchising, it's a free-for-all. It's less business- in-a-box, like, "Here's the brand. Go do what you want."
With us, it's far more controlled. We require minimum standards. We have minimum standards for signage and material and advertising, and so we're attracting the right agents to grow this company.
Right now, we'll end the year around 490 locations. We've done that in just under six years, which obviously is a great number for us. We have around 4,200 agents across the United States.
In the next 5 years, I can't project 10 because I don't even know where we're going to be in a year at this point, our goal is to be somewhere around a thousand locations across the U.S., really being in every market in the United States. Filling out in markets where we can continue to grow a little bit more, I project around 10,000 agents.
More importantly, we’ll probably be one of the top 20 companies in the United States. We're certainly on track for that now; we're already in the top 40. We're starting our expansion internationally next year, and we're getting ready to move into Canada, as long as the borders are open.
We're definitely starting to put our feet in the water for international expansion; we're looking at China, Mexico and some other countries where there’s a lot of foreign investments coming into the United States.
That's a target for us, and to keep doing what we're doing. We've got a great recipe. We're building out a great brand. We're building out a great tech stack. Certainly our culture is one of our winning things and we're going to continue to mold that. As far as real estate goes, it's going to be interesting to watch where it is.
I think you're going to see 2021 continue to be a great year for real estate. There's still a lot of movement that's going to occur because of COVID. A lot of people are hunkered down and they're going to want to move once things start opening up.
I also think politically you'll see a lot of movement for people aligning with states, where maybe they want to live in states that are more aligned with their viewpoints. You'll see a lot of cross‑state movement that's going to occur.
I think '22, '23 could be tough. There's certainly an undercurrent of foreclosures that are on the way from people who've unfortunately lost their jobs and are just barely making it by. You're going to see a significant uptake in that in '22, '23, so prices may level off, and be a little bit more of an equal buyer‑seller market instead of there just being no inventory and prices skyrocketing.
Interest rates are certainly going to go up, at some point they have to, and we have a hell of a lot of problems to figure out in this country politically. This is more divisive than we probably have ever seen in the history of this country.
We definitely need to find some calm and then the economy will sort itself out. We all know we're due for a market correction, the stock market can't keep flying like this. Overall though, here's the fundamentals of real estate:
We're four million units short of housing in this country. We went into it with four million units short in April. We came out of it with 20 to 30 percent less inventory per market.
If you look at fundamentals of supply and demand economics, I think real estate is going to continue to be a great investment. There will certainly be some slowdown in appreciation rates, but we have a housing shortage in this country, period.
We're not developing enough housing based upon population growth of household formation plus immigration into the country. From an industry perspective it's going to grow. I will also share that you'll see a lot of new business models pop up over the next 5 to 10 years.
I think that long‑term you'll see about half a million realtors left in the business, a more professional industry, and a lot more transparency into the transaction - a lot more involvement by the customer in the process, but I don't see real estate agents going away.
This is a complex thing that we go through. When I sold my condo in San Francisco a few years ago, the disclosure package was 232 pages, you're not going to automate that.
There's a lot of things that are going to shift in our business, but fundamentally people want to have an expert help them through a very sophisticated financial transaction. I think our industry will move, but the focal point of the transaction will still be through a real estate agent in long‑term.
Michelle: I want to go back, this is a side note, but you had said you spend time on the phone with your members every month?
Michelle: Then you said, also your agents. Do you have people from corporate that are talking to agents directly?
James: We do. We have two teams. We have Franchise Development Managers, which solely work with the franchisees, and we have a Member Services Team. We made a decision, and this was another thing we did well.
In most franchises, you build out some of your own tech and then you partner with companies on others. In real estate, that's very common. One of the problems with building a tech stack that's not all proprietary is you're dealing with other companies’ customer service, which is honestly a reflection of you.
For example, we work with DocuSign. Everybody knows who they are as one of our partners. The way we structured support was we decided that we were going to remove all support from the product companies and take all that in house, so our member services team only works with the agents in our company.
When an agent has a problem with any product or service we provide, they don't call the vendor, they call the corporate team.
We've been able to create a relationship with our agents where literally an agent will have a favorite person in member services they call, and we will help them with every single product and service that we both build and support as well as who we partner with.
That is also one of the reasons why our service level is where it is - because we are controlling that customer experience even with our partners to make sure they're not being handed off, and then it falls apart.
It's more expensive to do it that way, but for us it's the right way to do it because the agents develop this relationship with the corporate team. I know there's a lot of controversy with that.
Corporates are like, "I only want to work with the franchisee," and I get the legal challenges of that. For us, we also know that in order for this culture to work, the agent is also technically our customer, and so we work with the franchise, franchisee and their agents, and that's been a massive success for us.
We know ‑‑ just with the survey results ‑‑ that if we did the same survey of the agents, we would probably end up in the same spot because they have a one‑on‑one relationship with the corporate team, not just the franchise owner.
Michelle: That's why it stood out to me because I do think there used to be a definite line that the franchisor didn't cross to that employee directly, and the franchisee was very protective of that.
I think that's relaxed a little bit with how the NLRB is. It's looking different now, but I know the major challenge for business owners inside franchising and out is finding and retaining fantastic employees.
It seems by delivering a better experience for that agent, you're helping with that retention piece, that satisfaction, that engagement piece.
I think there's some definite considerations for brands to think about, and don't shut down that idea of crossing that line, but what would be the benefit to you, to your franchisee and to the employer - to the end user - of looking at that relationship differently?
James: Correct. Now I would caution one thing: Our industry's different in that most agents, 95 percent of them, are independent contractors. They're not employees of our franchisees. We have a little bit more wiggle room there to deal with that employer‑employee relationship.
To your comment, we know if we can create a relationship with them, and this is the fundamental point I wanted to make, they don't question the franchise fees, because the agent is paying us indirectly through the franchisee, the broker to us.
If the agent understands what we provide, then the fees that we charge are no longer in question. We're able to control that experience more by doing that. There is risk still, even though they're independent contractors, but that risk level is obviously quite a bit less.
I would encourage anyone, no matter what the business model is, to figure out who really is involved in the process of paying you and then figuring out a way to create that experience that you can control as much as possible down the line.
Michelle: That's good. I really appreciate your time. Is there anything else you want to share about NextHome or about franchising before we sign off?
James: No. My closing comment would be, first of all, if anybody's not using you guys, to please do.
I'll make this one closing comment. We get their reviews back, and what's ironic ‑‑ this is how passionate our team is -- we host a meeting and we sit down with all department heads and the senior team and we'll go through those results. I always have to tell the team, because they skip over 98 percent of the positive stuff, and go straight to the 2 percent of the complaints. I'm like, "Guys, first of all, celebrate the 98 percent that said we do an amazing job," but they don't care about that. They go right to the 2 percent.
My comment would be this: Sit down and don't be afraid to read the criticism. Look at the criticism and take it constructively and say, “OK this is a person who's willing to be honest with us and tell us what it is that they felt was off.”
In a way, honestly, celebrate the 98 percent and then throw that out and sit down and say, "This 2 percent we need to fix." Our goal is to figure out how to solve all these issues in the next 12 months, and all department heads and the senior team is aligned on that.
So many companies are afraid to hear that criticism, and they're like, "Yeah, whatever," and they just discount it. For us, we just hone in on that and go, "All right, our goal is to fix that two percent," and that's been able to help us get better and hopefully retain the spot that we've earned and more importantly make our customer happy.
Michelle: Love it. It's interesting because that’s what I tell people: Take time to celebrate. I will tell you that all the top companies that have the top scores, what I hear from every team is, they're fixated. It's better to be part of that conversation. It's better to hear what they think of you, because they're telling people, and it’s better to be part of that than to keep your head in the sand. I love hearing that.
James: Every single company should be doing this. I'm not plugging it for you guys. I'm talking in general. You should be serving your customers, getting that feedback, and focusing on the things that you can do better in your company. All the rest of it will figure itself out.
Michelle: I totally agree. Congratulations to you and your team.
James: Thank you.
Michelle: You guys are really top‑notch best‑in‑class. We're happy to share some of these ideas with others so that they'll hopefully follow suit. They might be coming after you for that number one spot next year.
James: Great. That makes the whole industry better. I look forward to it.