Better Homes And Gardens Real Estate Franchise

Financing Details

Better Homes and Gardens Real Estate is not obligated to provide financing but may offer it to help franchisees with conversion costs or growth opportunities. The financing is provided through promissory notes and is based on factors like the franchisee's financial need, credit history, ability to repay, net worth, business operations, and the development needs of their market area. Two primary types of financing are offered: 1. Conversion Promissory Note (CPN): This note helps with conversion or opening costs, including signage, materials, advertising, marketing programs, and recruitment. The CPN has a 9-year maturity and offers an annual opportunity for principal forgiveness. To qualify for forgiveness, the franchisee must meet specific annual Gross Revenue thresholds and comply with their franchise agreement. If these conditions are not met, the franchisee may be billed for a portion of the annual principal. If the franchise agreement terminates before the CPN matures, any outstanding balance becomes immediately due. 2. Expansion Promissory Note: This interest-bearing note is available to existing franchisees for acquisitions or other business-related expenses. The principal must be repaid in full six months before the franchise agreement's expiration date, and there is no opportunity for loan forgiveness. For both types of notes, the interest rate is 0%, but if a payment default occurs, the rate becomes 18% per annum or the highest rate allowed by law. All notes require a personal guaranty from all individuals with an equity interest in the franchise and their spouses, as well as a Security Agreement and a UCC-1 filing for the business's assets. Default on any note or the franchise agreement can lead to acceleration of payments and other remedies. Franchisees waive various notices, rights, and defenses, and agree that a confessed judgment may be taken against them in case of default.

Litigation Summary

Better Homes and Gardens Real Estate has been involved in several litigation cases, including six currently pending lawsuits and three resolved matters. Among the pending cases, three are class actions (Moehrl, Burnett, and Nosalek) filed between 2019 and 2020. These lawsuits challenge residential real estate industry rules, specifically regarding buyer-broker commissions and related practices. Better Homes and Gardens Real Estate reached a nationwide settlement for these claims in October 2023 for $83.5 million, with $30 million already paid. The remaining $53.5 million is due after all appeals are exhausted, likely no earlier than mid-2025. The final approval of this settlement has been appealed by several parties. Another pending class action, Batton, filed in January 2021, is on behalf of home buyers, raising similar concerns about NAR policies and buyer-broker compensation. Better Homes and Gardens Real Estate's motion to dismiss the state law claims in this case was denied, and they are vigorously defending it. The final approval of the aforementioned nationwide settlement may limit the size of the Batton case, but an appeal has been filed against that settlement's release of buy-side claims. Additionally, a class action (Chinitz), originally filed in June 2019, alleges that independent sales agents affiliated with Anywhere Advisors LLC (Better Homes and Gardens Real Estate's parent affiliate) violated the Telephone Consumer Protection Act (TCPA) using autodialing solutions. In January 2025, Better Homes and Gardens Real Estate entered into a $20 million settlement for this case, which is currently awaiting preliminary court approval. A new complaint, Homie Technology, filed in August 2024, alleges that Better Homes and Gardens Real Estate and other defendants conspired to exclude new market entrants from real estate brokerage services through NAR rules. Better Homes and Gardens Real Estate filed a motion to dismiss in October 2024, and a ruling is pending. Regarding resolved litigation, Better Homes and Gardens Real Estate was involved in a class action (Dodge/Agrawal), filed in November 2015, concerning alleged RESPA violations. This case was settled for $17 million, with Better Homes and Gardens Real Estate paying $8.375 million, and final approval was granted in August 2018. In terms of regulatory proceedings, Better Homes and Gardens Real Estate was part of a joint HUD and FTC investigation, which led to a HUD lawsuit in 2007 concerning alleged RESPA violations related to a joint venture. This was settled in 2009 without fines or penalties, with a permanent injunction. More recently, in February 2024, the Washington Office of the Attorney General initiated an investigation into alleged anti-competitive practices in the residential real estate market, issuing a Civil Investigative Demand to Better Homes and Gardens Real Estate's Real Estate Affiliates. Better Homes and Gardens Real Estate is cooperating with this ongoing investigation.

Renewal Conditions

Better Homes and Gardens Real Estate states that franchisees have no renewal rights for their franchise agreement. If the franchisor decides to grant an additional term, they may require the franchisee to sign their then-current Franchise Agreement or a Term Extension Addendum, which could contain materially different terms and conditions.

Staffing Notes

Better Homes and Gardens Real Estate franchisees are required to operate their offices with a licensed "Responsible Broker." The franchisee or owners must actively participate in management, providing continuous best efforts to maintain, develop, and promote the business. An office manager may be hired to oversee day-to-day operations. The Responsible Broker (or their designee) and one other "Key Individual" (responsible for Marketing, Operations, and Talent Attraction) are required to attend an initial Orientation program within six months of the office's opening. The typical office is designed to accommodate up to 30 people, including both employees and independent sales associates, who work under the franchisee's management rather than as employees of Better Homes and Gardens Real Estate.