August 9, 2016
4 Crucial Steps Millennials Need To Take Before Buying A Franchise
Franchising offers a unique opportunity for millennials who may not have prior business experience to work for themselves while avoiding the vulnerability that’s part of starting a venture from scratch. Almost three-quarters of the 80 million millennials in the U.S. say they want to be entrepreneurs and most of them are perfect candidates for buying franchises based on their values and skill sets, according to the International Franchise Association. In fact, 15% of attendees at the 2015 International Franchise Expo reportedly were under age 30.
NextGen in Franchising
The IFA launched a program called NextGen in FranchisingÂ to educate millennials about the industry. Its NextGen Global Competition engages young entrepreneurs who are seeking careers and business opportunities in the franchising industry. Competition prizes range from a complimentary trip to the IFA’s annual convention to a chance to participate and win cash prizes in the FranShark competition and a 90-day accelerator program.
There are millions of franchise businesses operating in more than 300 industry categories, from child care to senior care and e-commerce kiosks in airports to retail stores in shopping malls. So, what key things do millennials need to know to narrow down their prospective buys?
Finding aÂ Brand
Find the brand that’s matches your skills. Some franchisesÂ are in specific professions or whereÂ certain skill sets increase theÂ prospect for success. For example, a mechanic and Midas Muffler; an educator and a day care/day school concept; a real estate agent and a ReMax office.
Do what you love. Then are franchises that present opportunities to pursue a personal passion or interest. For example, fitness (Anytime Fitness), hairstyling (Supercuts), floral arranging (1-800-Flowers), massage therapy (Massage Envy), pets (Petland), travel agency (CruiseOne) andÂ staffing services (Express Personnel).
Read the fine print. Everything you need to know about the franchisor can be found in the Franchise Disclosure Document. All FDDs contain 23 items, including actual contracts franchisees will have to sign, as well as all of the company’s financial statements, information on staff, and the responsibilities of the franchisor and franchisee.
Talk to franchise owners. Find out about the franchisor’s relationship with current franchisees, and whether there is any history of litigation. The soundness of relationships won’t show up in a FDD, but you will get list of owners. Visit franchisees (in and outside of your area) and ask a few questions about what works for them.
Research your financing options. What kind of cash do you have in place? What is your liquidity? What is your net worth? There are options, including conventional bank loans, SBA micro loans, and 401(k) rollovers. Also, consider a multigenerational partnership. Meaning, get a parent or older relative, who has the funds, be the one to invest in the franchise while you are the one who operates it.