Many young entrepreneurs are interested in buying franchises right out of college. This idea may sound attractive on the surface but unless you have other advantages than a college degree, it is not something I would recommend. This has been tried by both franchisees and franchisors with mixed results. A lot of students try to earn money while still studying, some do non-core part-time jobs, some render statistics homework help, for example. Therefore, we decided to pay attention to an alternative way of earning money, like a franchise business.
A number of franchise companies tried out the idea of selling franchises to college graduates three to five years back. Usually, parents provided the financing. However, today’s market is not conducive to strong franchise companies attracting new franchisees from recent graduates.
What’s the point of this change? Two main reasons why previous attempts to convert recent college graduates into franchisees have failed are:
Abandonment. Franchisors discovered that young franchisees who had no financial resources were more likely to abandon their business and find a new opportunity. Parents were left with a business that they didn’t like and expected the franchise company to help them.
Employee Management. Most recent college graduates have no experience in retaining and recruiting good employees. This is the most crucial factor to success in business-format franchises. While everyone makes mistakes when learning how to manage and hire effectively, franchisors are used to helping new franchisees learn many of these lessons. The mistakes made by recent college graduates had negative consequences for the business.
These points might help you get a franchisor’s approval if you are determined to purchase a franchise straight out of college.
Gain general experience. To prepare for franchising ownership, the best thing is to get practical experience with minimum-wage workers, particularly in a managerial role. Even if your role is only as an assistant manager at a fast food franchise, you will soon have real-world experience dealing with employee problems. These skills include managing employees who don’t show up, arranging the work schedule and dealing with those who do show up but don’t work. You can go to school right now…on someone else’s money.
Find the right experience. Working in an existing franchise is a great way to get the experience you need to build the business idea you have. You can quickly get a good idea of how it works and whether you are really ready to take on the challenge. Many franchise companies will help you find an owner to mentor and support your plan.
A business plan is essential. A business plan will help you anticipate and plan for potential problems. You should include information such as the target market, how you will procure (on favorable terms), all the equipment and fixtures that you need for your business, cost and investment guides, to ensure you have enough capital for startup, and pro forma projections to estimate your revenues and expenses. A solid business plan doesn’t require you to be a business major. Just Google the term and you will find many resources.
Money vs. Thanksgiving Dinner. A well-known saying states, “Never start a business with friends or family.” This maxim is likely to be violated by you as most recent graduates will need to have their family provide the capital to start the business. Before you can enter into a partnership, you must discuss with your lender the potential loss of investment and how you will handle conflicts. You may not be invited home for the holidays if you don’t plan for every eventuality. No business idea is worth that.
Self-Assessment. Perhaps my final piece of advice is the most important. Spend enough time asking yourself the question “Is this really what I want to do?” Are you able to drive and have the determination to make your business a success? Do you have the guts to face all the heartache and obstacles that come with such a job? Are you considering this option because it seems easier than going through job interviews and interviewing for an entry-level job, like other college graduates? Parents also have questions: Are you trying to make your child return home after graduation with a job, or a business decision?
These are difficult, but important questions. It is simple to realize that franchising can increase your chances of success by getting started early and working hard on these issues. If you find the above points to be tedious, then franchising is not for you. If you view these steps as exciting steps towards true business success, then you might be the right person to become a franchisee.