Why Are So Many Millennials Getting Into Franchises?

The financial crisis of 2008 and 2009 scarred millennials. Ever since then, we’ve been struggling to find our footing in the job market, generating less income than our parents (in real terms), making it tough to get on the property ladder or have a family. As a generation, we’ve had to be resourceful, looking for ways to make ends meet while giving us a shot of reaching long-term goals. One of the ways to do that, it seems, is through franchising. Franchising is nothing new: companies have been doing it for many years. But thanks to technology and the desires of millennials to be more independent in their work than previous generations, it’s a concept that’s proving popular. Millennials can see how franchises could help their careers. Franchising is a way to quickly take ownership of a brand’s assets and use them to generate what could be a substantial income.

Let’s take a quick look at a few reasons why millennials are getting into franchises.

Reason #1: Franchises Provide Capital

It’s ironic: Millennials are saddled with higher debts than any generation of similar age in history, and yet, if you want to start a business to create value, you can’t get the capital you need. It’s a topsy-turvy world. On top of that, many millennials don’t want to take on even more debt than they already have. Student loans need to be repaid. Mortgages are outstanding. The last thing a young person wants is yet another loan bringing them down.

Franchises are a risk-free way to accumulate the capital you need to start a business. Granted, you’ll have to kowtow to overall company policy, but there’s no debt or equity risk: you get everything you need to start up your unit provided up front.

Reason #2: Rapid Growth

The next reason people love franchises is the fact that they grow rapidly. Opening a solo restaurant, for instance, takes time to become established and most fail. But building on the back of an established brand means that you can grab customers fast. People are much more likely to seek out companies they’re familiar with than ones they haven’t heard of. It takes a courageous person indeed to walk into a new sushi restaurant and start ordering a la carte.

Reason #3: Choose From A Wide Variety Of Careers

Franchises aren’t limited to the food service industry; you can open a franchise in practically any consumer-facing industry. You may, for instance, be able to find a pest control business opportunity instead of setting up your own firm. By jumping on the franchise model, you can get the autonomy you crave while at the same time, getting into a line of work that interests you.

All kinds of business sectors use franchising:

  • Retail franchises allow you to open a store selling the same items as the parent company
  • Home service franchises, like the aforementioned pest control
  • Automotive franchises where you run a dealership representing the brand, for instance, Kia Motors
  • Cleaning and maintenance franchises where you take over the control of a particular company’s operations in a particular area
  • Low investment franchises
  • Business service franchises, such as IT or management consulting advice

The opportunities for combining your ideal career with a franchise opportunity are, therefore, quite substantial.

Reason #4: Greater Independence

Companies know that if they want to get the best performance out of people, they have to give them a degree of both autonomy and incentive to succeed. Millennials don’t like having to go to work everyday, submit to a boss, and just do what they say – they’d rather make their own rules. Again, franchises can help. The parent company often gives the person who runs the franchise considerable leeway in how they conduct their operations. As a franchise owner, you’re more than a manager – you have a vested interest in the profitability of the company as a whole. You can make decisions such as who to hire and fire, how many hours you open, and even training of staff.

Reason #5: Sell Your Franchise At A Higher Valuation

Investors and buyers tend to value franchises higher than other types of businesses because of their ability to grow fast, generate profitability quickly, and their better organizational management. Franchises work together to secure a powerful brand and good relationships with suppliers and customers. It’s a team effort, rather than a solo one of a similarly profitable private firm. You can see the “franchise effect” in the data. Franchise Times magazine published data in 2012, which showed that investors accepted a P/E ratio of 26 for franchises compared to just 16.7 for the S&P as a whole.

Reason #6: Outsource Certain Responsibilities

Millennials don’t get into the world of business to spend their whole time doing ancillary tasks, like marketing and accounting. People choose the careers they want so that they can do the fun bits: the enjoyable stuff, like designing new products or managing a team. Starting your own business, however, often involves a lot of grinding away, doing a lot of tedious tasks that are best left to people who specialize in those areas. Franchises allow millennials with an entrepreneurial spirit to escape the monotony and outsource various functions to the broader franchise team. Franchisors can leverage and share marketing and accounting staff, avoiding those overheads themselves.

Reason #7: Higher Profitability

Okay, so the average millennial isn’t going to be able to retire by the age of forty, even with a franchise. But the fact that franchises are highly profitable means that the owners can skim more off the top at the end of each quarter adding considerably to their bank balances. Does the research back up the claim that franchises are more profitable? The answer is, “yes. Research suggests that franchisor’s bottom line is somewhere between 40 and 45 percent of their overall revenue: not bad when you think about it.

Will you pursue a career as a franchisor?

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