Prudential Real Estate Affiliates Inc. said Wednesday that it had dissolved its relationship with its largest real estate sales franchisee, Beverly Hills-based Jon Douglas Co., and signed contracts with three other California real estate brokerages.
The Prudential/Douglas merger was seen as a way for both brokerage firms to expand their sales networks and cut costs. However, since Prudential and high-end broker Douglas joined forces in 1995, they have had trouble resolving issues such as expansion, franchise fees and corporate identity.
“He was obstructing us from being able to grow and prosper. He had a large exclusive territory in this state and did not pay us a lot in terms of fees,” said Steve Ozonian, chief executive of Prudential Real Estate, which has 222 offices in California with nearly 6,000 agents.
Douglas could not be reached for comment.
Jon Douglas’ contract with Prudential expires in 1998. Ozonian said the decision to terminate the agreement was mutual and Douglas paid no breakup fee.
Prudential officials say they will grow instead by affiliating with smaller companies that will pay higher franchise fees.
Prudential added 80 California offices this week when it signed franchise contracts with Mission Viejo-based Ellis Realty Group, Mason-McDuffie Real Estate in Northern California and Sunset Realtors in Santa Barbara.
These firms will be rolled into Prudential California Realty, Ozonian said.
Despite the new alliances, an analyst says losing Jon Douglas, which has 3,000 sales agents and 63 offices around the state, is a major setback for Prudential.
“I think they have some serious rebuilding to do, especially on the west side of Los Angeles, where Douglas was so prolific,” said Patrick Veling, partner in Fullerton-based real estate consultant Dynamic Marketing Resources. In fact, Veling said that 53% of the homes sold by Prudential in California are through Jon Douglas.
Still, Ozonian said Jon Douglas contributed only 5% to its total revenue.
“They paid us a very low fee per unit,” Ozonian said.
Prudential also announced plans to open a retail brokerage in Irvine when it finishes moving its corporate headquarters there this week.