When Steve Morris launched Exit in Canada in the fall of 1996, he introduced a new real estate concept – single-level residuals.  Exit sales reps could earn 10 per cent of the broker’s portion of the commissions earned by a salesperson they had introduced (“sponsored”) into the Exit system, for as long as those sponsored sales reps worked for Exit. And they could continue earning residuals of seven per cent after they retired, as long as their sponsored sales reps remained with Exit.

During the past 10 years, this built-in income supplement and “retirement plan” has helped Exit grow to approximately 1,100 franchises, largely in the U.S. Below, founder and CEO Steve Morris explains why Exit’s initial expansion efforts have been more successful south of the border than in Canada, and what his expectations are for Exit’s renewed focus on Canada, in conversation with REM Senior Editor Kathy Bevan.

 

REM:  Why have Exit signs appeared more extensively in the U.S. than in Canada?

 

Steve Morris:   The reason is opportunity.  Initially what we did was divide Canada into 32 districts and we sold all 32 districts in 13 months – which was much faster than I thought we’d sell out the entire Canadian operation.  The idea was that those people running a district in Canada could make about three times as much money by selling the number of franchises they had to sell, as they could selling real estate.  It was an opportunity, and everyone after 6½ years of recession was looking for an opportunity.

 

We sold it for $50,000 a district – $25,000 down, $25,000 in two years.  And we broke the cardinal rule of franchising – we reached into the marketplace and took the top-producing agents to buy those districts.  Normally, you don’t do that because when the market comes back, they put their other hat back on and go back to selling houses.  So you don’t usually see top-producing agents selling franchises in a good market.  But the recession had just fried most brokers like chickens – there weren’t too many left to draw from who had money. The top producers could generate money, no matter what the market was like.  And to a top producer making a quarter of a million, buying one of our districts was like paying your taxes.  So it wasn’t such a downside risk to buy in. 


 

Then, faster than we thought, we had a syndicate of snowbirds who looked over the fence and said they wanted Florida.  We didn’t have franchise law to contend with in Canada, but when I looked over the border, there were all kinds of franchise law restrictions.  This was a little bit scary.

 

Things were happening very fast and the U.S. is so big – 10 times bigger than Canada.  All I could see in my mind was that once we entered in, we were going to be all over the U.S. map, and it would be hard to make an impact because of the size.  But my snowbird syndicate pushed and yanked and tugged – and about five months later, we had sold Florida. 


 

It was a very lucrative thing for us to do – to spend a lot of time in the U.S. – but there were only a few of us, on a very skinny budget.  As a small Canadian company going into the U.S. market, we already knew there hadn’t been a Canadian company that had been tremendously successful throughout the States.  So we knew we had to spend a lot of time there, flying back and forth. 


 

Florida was first on our U.S. agenda – who better to than snowbirds to sell Florida to?  So that was where we anchored into the womb.  We then started to play everything in the U.S. off of Florida.  Now we have 175 offices there, with just under 5,000 agents.

 

REM:  What was happening with Exit in Canada, while you were focused on selling the U.S.?

 

Morris:  The snowbirds who wanted Florida, initially owned Toronto.  There was a syndicate of them – they needed their money out of Toronto, to grow in Florida.  We literally sacrificed the Canadian operation for the American operation.  We knew that there were only so many of us, we had to keep the overheads low, and we had to spend all our time on airplanes, traveling across the country. 


 

To a great degree, the ones who had bought the franchises here (in Canada) were like kindling wood on the fire; the big logs were in the United States.  We knew we’d have to come back and literally revive Canada from being in a coma.  What had happened in the meantime was, guess what? The market had come back.  And those top producers?  Guess what – they went back to the market.  We had to buy back all our Canadian districts.  We now own all the districts in Canada, except Quebec – that we treat as a region, just like we do the regions in the U.S.




 

In Canada, we’ve anchored into the Maritime Provinces.  That’s not where we started, but when we came back to re-energize Canada, that’s where we focused our efforts. 

 

REM:  How important is growth in Canada to Exit now?

 

Morris:  Absolutely important.  The first objective in the Atlantic Provinces is to get a total of 40 franchises – we have 22 sold there now.  So we have a little bit of work to do there, to top up.  Most of these franchises are small, peripheral offices, such as all the way round Nova Scotia.  This will finish off this part of Canada for us.  


 

Then our objective is to open up the West this year.  Our president in Canada, Joyce Paron, will be doing “60 Minutes with Exit” presentations in Manitoba, Saskatchewan, and Alberta – inviting people in, telling the story.  We’ll play the rest of Canada off of the east coast, just as across the border, we played the rest of the U.S. off of Florida.

 

Right now we have 56 offices and 1,000 agents in Canada, but the momentum is just starting to pick up nicely.  Ultimately we’re talking 320 franchises across Canada – bottom line, 14,000 agents; top line, 18,000 agents.  This isn’t tied to a timeline – we just know what we want.  We’ve mastered – over 10 years – how to pound the pavement and what works.

 

REM:  And just what does work when you’re pounding that pavement?

 

Morris:  We have a team of people – including me – who deliver group presentations, called “60 Minutes with Exit”.

 

In the insurance business there was an agent out of Texas who sold insurance policies by inviting groups into a room and having people walk through the room with application forms – he made himself into a millionaire by the age of 27.  I thought that was a great idea. 


In the Re/Max organization, I’d done hundreds of presentations, but they were always one-on-one.  But I began thinking about telling the sales story to a group.  And there’s a rule of thumb in the real estate business:  if you supply the food and drink, real estate agents will follow you anywhere.  So we began putting on the presentation.  We’d sit people down for an hour, provide a great spread of food, and do these presentations as often as five days a week in Florida.  And we started to sell franchises.

 

I still do these presentations – I do 65 a year.  I’ve also got six other people who do the same thing, right across the country, in Canada and the U.S.  My average audience last year was 225 – when we started, it was 20.  It was hard to fill a room – now it’s to the point where very seldom would you see anyone put on a “60 Minutes with Exit” without at least 125 people in the room.

 

REM: Once you get someone interested, what “sells” them on Exit?

 

Morris:  What’s been the blowtorch to really make this hot?  We specialize in teaching, training and coaching.  We do this through apprenticeship – a top performer is going to be teaching you, whatever it is that you’re about to learn.  These are people who have done it, are doing it – you fly under the wing of a champion to access that “pass me down” wisdom. 

When we put in our trainers, we say from an apprenticeship standpoint, if you’re not making more than $500,000 doing what you’re going to teach, I don’t want you teaching anybody anything.  When you arrive, I want the people you’re teaching to know you’re a pro.

 

We teach everything from personality and temperament analysis to the art of negotiation, to canvassing on the telephone – our trainer works with you on the phones while you’re making a call.  We door knock with them – we take them on buses and take them right to the door.  The person walking up to the door with you is a champion doorknocker – they take you through that apprenticeship.  We don’t send them out and tell them to do it – we take them there.  All of the psychology necessary from the standpoint of selling is strategically organized and developed from a central location. 


 

All our training is centralized – it’s all done here, out of Toronto.  Our broker training sessions average between 80-100 new brokers in the room.  We provide open-ended training – it’s not one session you’re supposed to use for the next 35 years.  They’re allowed to come back as often as necessary to top up.  They pay the cost of the flight and the accommodations; there’s no charge for the training. 

 

REM:  You explained some of the initial thinking behind Exit in your first interview with REM, when you launched your company in the Toronto area back in 1996 – can you take us back to how the idea for Exit first arose?

 

Morris:  I had worked in the life insurance business, which taught me about residuals.  I fell in love with residuals; I just didn’t love the life insurance product.  


 

So when I came into this business, the thing that’s glued me into this business and kept me here is the product.  The value of the product, in the hands of the customers, is so substantial – and it’s a big product, for a big commission return on that product sold.  That was very important to me – I had sold small products up to that point. 


 

When I went into the real estate business in 1976, I started in Canada Permanent Trust Real Estate.  Ten months later I was a manager; then top sales manager in Canada in three years; and district sales manager in the 1981 boom, where interest rates went to 22¼ per cent.  I was managing managers at that point. 


Then Re/Max came along. I was with Re/Max for 13 years, and really cut my teeth.  Desk fees meant you paid for the privilege of earning top commission – I describe it as high school in the real estate business.  Public school was the way it used to be, previous to desk fees.  The impetus of desk fees was a very important thing – in fact, without Re/Max, Exit would not exist.  I got the idea from the insurance business, but it was important to get into the thick of it with the better producers and a competitive situation.

 

Then the question became, was there any way of outflanking the desk fee concept?  I figured the only way you could ever outflank Re/Max was if you had a company where you could make more than 100 per cent and not pay any desk fees.  And of course that looked like a huge enigma.

 

That’s when I thought of insurance business residuals.  I figured I was onto the biggest thing since sliced bread, but I didn’t have any money – just a great idea.  This would be a very big, systemic change – literally the second paradigm in real estate.  The first paradigm was “pay for the privilege” of earning a top commission – desk fees.  The second paradigm:  single level residuals, creating a future where there had never been a future before, for real estate agents and brokers. 

 

REM:  Your choice of the name Exit appeared to be a bit of an enigma in itself.

 

Morris:  The name makes people recoil a bit the first time they see it, but ultimately, that’s been our finest asset, that name.  Our competition looked at the word Exit and said, “Why in the world would you ever choose a name like that?”   Our competition to this day is still looking at the name, because they don’t see it with the eyes of an advertiser.  Exit means “safe passage” – when you sell your house and you leave, you’re making an exit. It’s the perfect use of a four-letter word!  Our name has acted like a smokescreen for us. It has stymied the competition – they are still looking up at that sign, while we’re sneaking under the bridge.

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