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Written by rosalind renshaw

Franchise lettings chain Martin & Co announced this morning that it is to float on the AIM market of the London Stock Exchange, with dealing expected to start on December 18.

The float will involve a placing of shares to raise £4m for the company, plus a further placing to allow a partial exit of the founders, husband and wife Richard and Kathryn Martin.

MartinCo Group – its official name – currently has 157 franchisees trading at 187 offices, with a further two offices that are currently owned by the company. The group recently added sales, and 95 of its franchised offices now also operate estate agency services.

The company will join its competitors Belvoir on AIM. It has been highly successful since its launch as a franchise model in 1995. It has a high level of franchisee retention with 63 franchises having been with Martin & Co over five years. All told, the franchisees manage some 30,000 properties, and last year agreed over 25,000 lettings. In 2012, eight franchise owners earned £500,000 or more.

Combined turnover of the network was £35m last year, with £37m expected this year. The franchisees pay an initial fee plus a management services fee of 9% of turnover.

In this morning's statement, the company said that the private rented sector had grown and that the franchisees had a 1.4% market share in the places they operate: "The directors therefore believe there is a large and growing potential market to capture," said the statement. "The directors believe that the UK lettings market is highly fragmented and split."

The statement continues: "The directors believe there is a clear opportunity for Martin & Co to further grow its national franchise brand through a combination of organic growth, an acquisition programme and the expansion of its estate agency network."

Richard Martin who founded the business is now its chairman and is 62. He started his career typesetting in local papers before going over to the advertising side, becoming advertising manager for a string of free titles in the west country. He and his wife Kathryn set up Martin & Co in 1986. Originally, it was a conventional letting agency and it was not until the mid-nineties that it launched its franchise model.

The firm's chief executive officer is Ian Wilson, who joined from Connells where he was lettings director. Non-executive director is Paul Latham who was deputy CEO of LSL until 2010, and a non-executive director of LSL until last year.

 

Comments

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    Belvoir, Martin and Co and Leaders for that matter - all smuggly rode the crest of the "We only do Rentals" wave whilst much better counterparts in sales struggled to cope with a 50% reduction in transaction numbers - that wave is approaching the beach and they are all now cr---ing themselves and desperately trying to turn themselves into sales agents overnight.
    Problem is they dont have the knowledge, experience, funds or where with all to do it properly - as a franchisee I know commented - "way too little and far too late" Their sun is waning and these are the last desperate measures of people who happened to be in the right place at the right time now trying to coax one more golden egg out of a dead goose! Your goose is cooked the real multi disciplined agents time has come again !!

    • 05 December 2013 17:52 PM
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    I'd have thought that M&C are floating precisely because they've seen what's happened at Belvoir, where the key shareholders have seen the value of their shares more than double in 18 months. This is easier money than you get from flogging franchises.
    I don't have Belvoir's figures for franchisee retention, but I'd be shocked if they aren't higher than this. However I'd expect that too - the type of person who buys a Belvoir franchise and pays more does so because they value the 'quality' image and are in it for the long term. The M&C sales proposition is more 'get rich quick' which attracts a certain type of person.

    • 04 December 2013 20:26 PM
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    Hello IO. I agree that 63 out of 157 franchisees retained after 5 years is a low figure and I'm not convinced its correct. I'm sure I see more than 63 familiar faces at the AGM. Perhaps something has been lost in translation.

    I also accept that my franchise is considerably larger than the average MAC franchise (in fact it was in the top 8 last year if a line in the above story is correct), but I started it from scratch and I've paid 9% every step of the way. It didn't stop me from paying myself and investing in business growth, and, overall I consider it to have been a good investment.

    Its true that some MAC franchisees have failed, but that's equally true of any business venture - there's always an element of risk, if there wasn't everyone would be doing it.

    Its also true that the average MAC franchise "only" turns over about £200k per year, but heck, a lot of my competitors aren't even VAT registered which means their turnover is less than £80k.

    By the way, just in case anyone was in any doubt, when the article refers to 8 franchise owners earning £500,000 or more they're talking about turnover, not profit. MAC is good, but not that good :-)

    • 04 December 2013 10:35 AM
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    I can’t see how Martin & Co can grow without a complete change in their business model. They have reached critical mass with the franchising business, additional capital will not facilitate significant additional growth. Even if it did and they doubled in size, 9% of revenue adds up to no more than £7m, hardly FTSE 100 material.

    Martin & Co need to own the distribution and buy-out their franchisees, this however is far from simple. Owner drivers are always far more diligent than those that drive company cars. Franchise owners will be more committed than hired hands and if Martin & Co start a buy-out programme they will need to hire branch managers and this is riddled with problems and poor performance.

    It will be very interesting to read their prospectus and understand their strategy. Timing is poor for investors, letting agents have never been valued so high and current valuations may not be sustainable. If the sales market returns, Martin & Co are way behind in terms of taking advantage.

    • 04 December 2013 09:30 AM
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    Hi Steve from Leicester

    Thought you'd be in on this one.

    The figures may not apply in your case, but in the majority they do.

    And Adrian is absolutely right - 63 out of 157 having 5 or more years experince is a very low figure and shows a very high turnover/fall out rate or whatever you want to call it.

    If it was that good a deal why wouldn't more be there longer. The article is wrong - it is noit a high retentiuon rate at all.

    Do you know what the Belvoir figure is by comparison? Mind 9% fee is low, Belvoir charge 12%

    • 04 December 2013 08:58 AM
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    Einstein - you list all these overheads but with the exception of the 9% management fee these are common to every lettings business.

    I'm a MAC franchisee of ten years standing and Adrian will presumably be staggered to learn that I consider the many hundreds of thousands of pounds I've paid in management fees to Mr Martin over the years to have been a good investment.

    • 03 December 2013 20:28 PM
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    Quote, "It has a high level of franchisee retention with 63 franchises having been with Martin & Co over five years".

    This sentence makes no sense, unless an advertorial. There are 157 franchisees and with a rentention of 63 means that 40% are more than 5 years - hardly "a high level".

    It can't be down to expansion neither - as I seem to recall in around 2007/8 that Ian Wilson was very upbeat on achieving their target of 200 offices by 2010 (which I thought was very ambitious) - yet the number of offices has only grown by a dozen or so in the five years since.

    As Einstein has pointed out, a management fee at 9% of gross turnover (not profits) is like an open wound, constantly draining the life blood of the business. so maybe the some of the 40% saw the light.

    I don't suppose the "placement" will pose any moral worries for Richard though - not when he is basking in the sun on his boat in Marbella!

    • 03 December 2013 16:10 PM
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    So on average each office turns over £197,860 and lets about 134 properties each year... You'll give £17,807.49 back to Richard Martin, about £39,572 to HMRC, office costs, regulation, salaries, advertising, insurances... how much is left to pay yourself and invest in the business growth??

    • 03 December 2013 15:38 PM
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    Another franchise floats - who will be next?

    • 03 December 2013 09:52 AM
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