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Franchise Ownership: Should Unemployed Boomers Start Looking Into It?

Posted: 10/05/11 05:10 PM ET

For those that were employed in executive-level positions, and have been out of work for a long-time, one increasingly popular option that's being looked at is franchise ownership. It's becoming painfully clear that good high-level jobs can't be created out of thin air, so lots of very frustrated downsized executives are looking at alternatives to traditional employment. But, is becoming the owner of a franchise business the answer?

A fair number of the long-term unemployed are baby boomers. And, it's baby boomers in the 55-64 year old range who are "Driving a New Entrepreneurial Boom," according to Marty Zwilling, an experienced startup mentor, and Huffington Post blogger. Franchises are certainly on the radar screen of these new entrepreneurs, and with good reason; according to the International Franchise Association's 2011 Franchise Business Economic Outlook, it's estimated that the number of franchise business establishments will grow 2.5 percent this year from an estimated 765,723 to 784,802--an increase of 19,079 new establishments.

Let's look at some of the benefits of becoming the owner of a franchise.

The model: The franchise business model provides a proven formula for people that are interested in starting their own business. The cost of entry to use this formula is an upfront franchise fee. Once the business is up and running, franchisees pay royalties (usually a percentage of gross sales) for the continued use of the formula.

An operating system: Also known as the blueprint, this includes the franchisors operations manual that details everything a franchisee needs to know to start the business. It includes guidelines that franchisees need to follow in areas like equipment, inventory, design, branding, marketing, customer service, accounting and more.

A formal training program: Franchise training programs are generally top-notch, and include just about everything that franchisees need to know about opening, operating, and growing a successful franchise business.

Group purchasing power: Franchisees of medium to large franchise systems can take advantage of the franchise's size. For example, a 200-unit franchise chain can purchase supplies that all franchisees need much cheaper than a single franchisee ever could. This buying power translates into a competitive advantage at the local level, too; franchisees can pass on their savings to their customers, while at the same time, attract new ones.

Brand recognition: A franchise system that has attained "brand status" can be pretty powerful thing. It can provide a real path to serious market share, while at the same time help franchisees increase the value of their individual businesses.

Support: Franchisors provide support to their franchisees in several different ways during various times in the business cycle. Things like pre-launch support at the beginning to field visits throughout their time as franchisees, are usually just part of what franchisees receive in terms of support from the franchisor.

The franchise business model does have lots of powerful benefits, which is why so many people
are attracted to it. But, there are some disadvantages to it also, which I need to point out.

Uniformity: This is the hallmark of franchising, but it can be a disadvantage for some. For franchising to work, every unit has to operate in the same manner. Every franchisee needs to adhere to the operating procedures and rules that are spelled out in both the operations manual and their franchise agreements. Anyone contemplating franchise ownership needs to look deep inside themselves to make sure that they'll be comfortable following The Rules.

No Company Benefits: While some franchisors provide an opportunity for their franchisees to become part of a group health insurance plan, it's not the norm. This can be a major hurdle for some. Also, when it comes to retirement plans, it's usually up to franchisees to create one for themselves; it's not part of a typical franchise package. One more thing; franchisees don't get paid vacations. (Unless they pay themselves.)

Short-Term Income: For those that have been out of work for a long period of time, and don't have fairly large nest eggs, this could be a deal-killer. Start-up franchises don't typically make money for a while, so this may not be the best choice for people that need an immediate income. Locating an existing franchise that's been in business for awhile and that has revenue coming in, could work out better.

Franchise ownership may be worth looking into for people that have been out of work for
awhile, who have decent net worth's, and are comfortable with the mostly rigid business model
of franchising. I've included a couple of resources, below.

If you'd like to learn more about franchising, there's a very thorough online consumer guide
available from the Federal Trade Commission.

The US Small Business Administration provides even more information on franchising,
including details on how to apply for a small business loan.

The Franchise King®, Joel Libava, is the author of the upcoming book, Become a Franchise Owner! The Start-Up Guide to Lowering Risk, Making Money, and Owning What You Do

 

Follow Joel Libava on Twitter: www.twitter.com/franchiseking