Youth in franchising? Millennials at the helm? Can younger people with relatively little business experience (or money) learn to manage a successful franchise operation?
A combination of several factors says yes: prospective franchisees looking to make a living in a tough economy, franchisors seeking to expand their system in an era of tight credit, and the aging out of a generation of Baby Boomer franchisees. This confluence of economics and demographics has led to a rise in the numbers of younger people signing on as franchisees.
First, the demographics of youth. Members of Generation X, born about 1965 to 1976, hardly qualify as “youth.” So let’s focus on the next group, Generation Y, also known as the Millennials, born about 1977 to 1990. Millennials also are a big group, dwarfing Gen X and about the same size (70-plus million) as the post-Second World War Baby Boomer generation (born 1946 to 1964).
Millennials account for more than 25 percent of the adult population in the U.S. And the reality of the oldest of the Baby Boomers retiring is a scary prospect for franchisors, who are working to fill that gap by developing recruitment and training programs aimed at Millennials.
For many in this group, the job market has been dismal in the past decade, just as they came of age and looked to begin their working careers. With employment prospects dimmer than in previous generations, Millennials have been forced to seek alternatives to traditional corporate careers. Many have moved back home with their parents, while others have chosen to attend graduate school to bolster their credentials in the hope that their employment prospects will improve by the time they’re done.
Others are eager to get started in business. They do the math and realize that the price of graduate school and the price of becoming a franchisee are not that different — and that franchising pays a lot better than grad school, an important factor when you’re facing the prospect of paying off student loans.
Most college grads and twenty-somethings don’t have the financial resources for a franchise fee, opening costs, and surviving the first crucial years. Nor do they have the business experience or the people and life management skills required to succeed in business, which is another reason many will choose franchising over starting out in business for themselves. What they do have in spades, however, is energy, enthusiasm, an eagerness to learn, fresh ideas, and perhaps most important, parents and relatives willing to finance their entry into a franchised business.
Some of these parents are the same Boomers who are preparing to retire. Those who are franchisees might want to turn the business over to their offspring, and can offer training, support, and mentorship as their children learn the business. Others are seeking to give their children a good start in business and realize that the franchise model provides that training and support, and that mentoring can come from experienced franchisees within the system. However, those whose retirement savings were severely reduced by the Great Recession must not only work longer (which means fewer opportunities for younger people), they also must find ways to make more money for their Golden Years. Investing in a franchise through their children is one way to do that.
These youthful franchisees appear to have much going for them, and franchisors report their success rate is about on par with older first-time franchisees. Some assets youthfulness has going for it in franchising are a willingness to listen and learn; energy and passion; the ability to work long hours to build their business; fewer preconceived ideas about business than older people have (i.e., a greater willingness to follow a system); and an entrepreneurial spirit that has been trained to collaborate more than previous generations. Many have started businesses in high school and college, and are better prepared to manage than franchisors might expect. Some have done so with friends, and team up with them as franchisees to share the financial and management burdens of operating a franchise.
Younger people also have grown up with technology, an increasingly important part of managing and marketing a business today. Their affinity for computers is a given, and social media is a part of their everyday lives. And for franchise concepts or brands that employ teenagers (fast food, especially), their closeness in age can help bridge the “generation gaps” so many older franchisees struggle to overcome in their hiring and retention practices.
On the down side, youth is a time of exploration, and franchise agreements run five years or more. Can young people commit for that time when their lives are still taking shape? What if they fall in love with someone across the country, or even in another country? What if they turn out to be incapable of managing people, doing the books, or marketing? While this can occur with older franchisees, at least those prospects have more of a track record, have done their exploring, and are looking to settle down and settle in for the long haul.
Young people most likely to succeed as franchisees will enlist experienced, older advisors, whether their parents and family, other franchisees, or by hiring or outsourcing or partnering with professionals who can make up for their youth and inexperience. After all, while enthusiasm can go a long way, it’s nice to know where you’re going. Enlisting the aid and support of people who have already “been there, done that” can help youthful franchisees not only determine where they’re going, but provide them with the operational, financial, and management tools and skills they need to get there.