Thereâs a youth movement brewing in the franchising world.
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Usually, franchisers don’t want to gamble on young entrepreneursâthey prefer seasoned managers who have built up lots of savings to plow into the venture. Now a host of companies are rethinking that logic. They’re aggressively recruiting twentysomethings through franchise brokers, marketing themselves in youth-friendly venues like Facebook, and in some cases offering financial lures to get young people on boardâsuch as deep discounts on franchise fees, which many beginners can’t afford.
A Foot in the Door
Why the big change? For one thing, many boomer franchisees are retiring, leaving room for newcomers. And many franchisers say that today’s crop of twentysomethings are much better prepared to run a business than earlier generations of youngsters, since more colleges are offering strong training in entrepreneurship.
Then there’s attitude. “Sometimes the younger people have more drive and are willing to put in more time and maybe are hungrier than a corporate person who has other commitments,” says Patty Meyer, a senior consultant for Toronto-based MatchPoint Franchise Consulting Network, which helps companies recruit franchisees. “Younger people are able to get things moving faster in some cases.”
Of course, in these tough times, franchisers are offering lots of people discounts to get them to buy into the business, not just twentysomethings. But many franchisers and brokers say they’re making a particular effort to bring in young people. Several franchise companies, for instance, say they have joined the Veterans Transition Franchise Initiative, known as VetFran, in order to attract young veterans. The program, created by The International Franchise Association and promoted by the U.S. Department of Veterans Affairs, the nonprofit Veterans Corporation and the U.S. Small Business Administration, aims to help veterans of all ages by giving them a discount off initial franchise fees of member companiesâusually between 10% and 15%.
Other companies are using different incentives to get twentysomethings on board. Consider Valpak Direct Marketing Systems Inc., a direct-mailing company in Largo, Fla., owned by a subsidiary of Cox Enterprises Inc. Last year, Valpak created the Entrepreneurship Award Program in an effort to recruit young people who could open new franchises or take over existing ones as owners prepare to retire. The potential franchisees sign on with the company as salespeople, and if they hit certain goals they get a discount on their franchise fee. Along the way, they get to know the business and the company gets a sense of how they perform.
One hopeful is Nicholas Hernandez. At 23, he has already openedâand closed downâhis first start-up, a music-promotion company. He wants to run a franchise, but for now, short on cash and experience, he’s a salesman.
If he brings in $1.1 million in three yearsâthe average sales raked in by the top third of the company’s performers over the past three yearsâMr. Hernandez becomes eligible for one of three things: $50,000 toward the fees for one of Valpak’s dormant territories, which start around $43,000 but range higher as the market size increases; $10,000 toward the franchise fee of an International Franchise Association member company; or $10,000 toward an M.B.A. or other advanced degree.
“Quite frankly, sharp people coming out of school have choices, and so we’re trying to give them a reason to at least consider us,” says Joe Bourdow, president of Valpak, which has about 170 franchises in the U.S. and Canada. He started the program after visiting colleges and finding himself impressed by the students he met.
Hunting for Talent
Another company aggressively looking for young people is WSI, an Internet-marketing franchiser with 1,500 franchisees in 87 countries. In 2007, the company launched the Young Entrepreneur Scholarship Program, which awards franchisesâminus the initial feeâto people between 21 and 31 years old. Candidates must propose a business plan for how they would run the franchise and are also judged on their community involvement, education and personality.
Company executives say they need tech-savvy franchisees who can help the company stay on top of the latest technology. “If we can help capture some of the young talent and bring them to WSI franchising, then we’re really meeting the needsâ¦of bringing in the innovation needed to develop the business,” says Maribel Guiste, vice president of franchise operations for WSI.
So far, only one WSI scholarship has been awardedâin Latin Americaâbut the company plans to select two recipients in North America by the end of September. Overall, 13% of the Toronto-based company’s franchisees are younger than 30, up from 2% in 2006.
Other companies aren’t offering inducements but are still pushing heavily to land young entrepreneurs. For instance, many companies are telling their franchise brokers to pursue the demographic. David Omholt, a franchise broker in Plano, Texas, says about a third of the 200 companies he works with have stopped giving age ranges for their target franchisee and are changing their marketing materials to minimize jargon and depict franchisees of all ages. “It’s quite a departure from the traditional mentality of who to recruit and how to recruit for new franchisees,” says Mr. Omholt.
Rich Wilson, chief operating officer of CertaPro Painters, an Oaks, Pa., painting franchiser with over 300 locations in the U.S. and Canada, had a similar chat with his franchise brokers earlier this year. Mr. Wilson also joined VetFran, in an effort to recruit young veterans who may have saved some money while they were deployed. “We have people [ages] 25, 26 and 30 coming in and earning better numbers than our more mature franchisees,” says Mr. Wilson, adding that about 15% of the franchisees CertaPro recruited recently are younger than 35, up from 10% six years ago.
A Risky Bet?
Still, this new focus on youth carries some risks, particularly when incentive programs are involved. Some franchise consultants warn that these programs might attract franchisees who don’t fight as hard because they’re not investing as much of their own money or who might not have the finances to cover regular business expenses.
“The real risk is that you end up bringing on a marginal franchisee that is going to cost you more and return less,” says Mark Siebert, chief executive officer of iFranchise Group Inc., a franchise-consulting company based in Homewood, Ill.
Some experts worry that a younger person buying a franchise might have a hard time hiring, managing and firing employeesâdifficult tasks for even seasoned businesspeople. But some of these programs, like Valpak’s, address that issue by allowing for a test run of sorts, where the candidate and company get to know each other.
At Valpak, Mr. Hernandez sits down once a week with his boss and mentor, Bobby Coco, to decide what neighborhoods to target and what companies to follow up with. Mr. Coco also shares what he’s learned in 35 years of running Valpak franchises. How to meet press deadlines and set realistic goals. How to approach potential clients. How to convert that burning desire into success.
Mr. Hernandez, who graduated last year from William Paterson University in Wayne, N.J., says the structure and financial help the program offers make his entrepreneurship goals much more achievable.
“Having to deal with my own business and having to set up my own reputation, my own brand nameâit’s very difficult,” he says.
Mr. Coco says programs like this were unheard of when he opened his first franchise at age 21âa move he could afford only because he convinced the owner at the time to give him a payment plan. “We really weren’t handed the opportunity; we had to stick it out ourselves,” he says. “We’re at least giving them the opportunity, but they still have to earn it.”
Corrections & Amplifications:
The International Franchise Association created, and runs, the Veterans Transition Franchise Initiative, which aims to help veterans start franchises. An earlier version of this article incorrectly stated that VetFran was created by the Department of Veterans Affairs, the nonprofit Veterans Corporation and the Small Business Administration, which promote the program.
–Ms. Marte is a staff reporter of The Wall Street Journal in South Brunswick, N.J. She can be reached at email@example.com.