The American real estate franchising company RE/MAX, which entered the Czech market this past winter and officially opened its Prague office in May, may be foreshadowing the future shape of the country's real estate market, according to Petr Podlešák, managing partner of the first RE/MAX office in Prague.

Vojtěch Krátký, regional director of RE/MAX in the Czech Republic, agrees, describing a shift in the profile of real estate companies operating here. "In the early '90s there were at least 3,000 companies," he says. "Today there are around 300, and this trend will continue." It's a natural evolution of the market, he says, a sort of "pruning out of the less-successful companies."

Jaroslav Novotný, president of the Association of Real Estate Agencies, agrees — to a certain extent. "There is definitely consolidation happening here, but this is simply the result of the Czech real estate market having matured," he says. "It's something that's happening all over Europe. I don't think that the presence of RE/MAX here will change things too much."

The real estate agencies themselves, particularly those focused on the local market, don't seem to be too worried about possible competition from RE/MAX, either. Zdeněk Jelen, owner of real estate company Domus RK, says,"Obviously, this new franchise will get a significant chunk of the pie. But for locally specialized companies like us, this shouldn't have too much of an impact."

RE/MAX entered the market after selling franchising rights in the Czech Republic to the Prague Top Estates agency, headed by Krátký. Further expansion is already under way, with RE/MAX offices scheduled to open in Brno, Zlín and Ostrava.

Why did RE/MAX wait so long to enter the Czech real estate market? "It was a logical progression," says Krátký. "This company hasn't been in Europe all that long. Over the past 10 years since coming to Europe, RE/MAX has slowly moved eastward."

Podlešák says that it was also a matter of biding time until the Czech Republic entered the European Union. "It made sense to wait until the market became more stable," he says.

According to Krátký, the immediate post-revolution years of the Czech real estate market were something akin to a gold rush. "There were many small offices out there that wanted to make the maximum profit possible very quickly," he says.

Podlešák agrees, saying that as a direct result, the quality and the reputation of real estate companies in the Czech Republic during the '90s was very poor. But that's changing.

One area where many real estate companies in the Czech Republic need to improve is in services after the sale, according to Krátký. Also missing is a sense of security for the customer, he says. "You need to build a relationship with the customer. Your job doesn't end after the sale is closed."

As with most franchises, along with paying a one-time fee for use of the brand name, the local owners of RE/MAX offices must pay a percentage of their profits every month. But Krátký says the owners have a high level of independence and flexibility. "Their company is their product," he says "Owners can sell it or pass it on to their heirs."

According to Krátký, there are three types of people who open a RE/MAX franchise: Those already in the business; people with a business background but little experience in real estate; and entrepreneurs looking for a new way to specialize. Flexibility and a good business sense are what matter above all else, according to Krátký. But all agents must have a sound knowledge of the local market and real estate law, which is why the company provides its agents with schooling on a regular basis.

Podlešák says that when he was considering whether to establish his own real estate company or join RE/MAX, the recognizability of the franchise name is what persuaded him. "It takes years to build a brand name that people will recognize," he says.

The key advantage of being part of a franchise, according to Krátký, is the high success rate. "The odds of succeeding when you open a new business are about 15 percent," he says. "If you join a franchise, the odds are reversed. You have an 85 percent chance of succeeding."