In the past four years, millennials—those born between 1981 and 1996—have gone from three per cent of my incoming clientele to 20 per cent. Millennials are an emerging force in the franchise industry, and FranNet is actively working with this influential group of future franchisees. What’s behind this mutual attraction?
Millennials’ job criteria
Though unemployment is not a major issue amongst millennials as the robust economy is creating plenty of jobs, finding long-term employment that meets millennials’ job criteria certainly is. It’s safe to say that a large cohort of millennials has a different perspective on work from their parents.
One reason millennials view work differently is that there have been significant structural changes in the jobs market. The career ladder in the corporate sector has lost a few rungs:
- Many companies are asking fewer people to do the same amount of work (more work, more responsibility, more stress… without a commensurate increase in pay);
- Lifetime employment with the same firm has become a rarity, and it is now common for workers to regularly shift from job to job, or from contract to contract. Otherwise known as the gig economy, many contracts range from six to 24 months, and then it can take another six to 12 months to find the next “gig”, meaning LOTS of income earning gaps over the course of one’s career.
The impact of such changes is compounded by the tendency amongst millennials to:
- Be more purpose- and value-driven in their work than their predecessors—they seek to truly enjoy the work they do and want to have a sense of contribution to their cause(s); they are also far more inclined to seek remuneration based on results and not time.
- Seek more structure in and control of their work environment and life.
In many respects, what millennials are looking for dovetails with what franchising has to offer.
Franchisors need millennials
But why would franchisors be interested in millennials, most of whom lack both the money and experience? Two reasons stand out. First, many existing franchisees are getting on in years and are comfortable with their current levels of performance and lifestyle. While this is good for them, the franchisors are constantly looking for more growth opportunities so an infusion of fresh thinking in the franchise industry is essential. Second, millennials are creative, forward-looking and tuned to the mindsets of their contemporaries—who are major customers of franchise brands and will be driving the market for years to come. Franchisors who fail to tap into the deep millennial talent pool risk becoming irrelevant.
How millennials are getting started in franchising
Many franchise companies have changed their culture and devised new management systems and communications practices in an effort to reach out to millennials. The occasional franchisor will offer special financing programs that make it much easier for millennials to get into franchising by lowering up-front costs. This is rare, though. Because many millennials have not yet built up significant financial reserves, affordability is often the biggest challenge. It’s critical to understand funding options:
- FuturePreneur is a program that provides up to $45,000 to young entrepreneurs, though this is usually not enough.
- Personal savings: with the recent change in mortgage rules, many millennials who were saving for a home purchase have suddenly been sidelined from the real estate market. We’re seeing a shift in the use of these savings from home ownership to funding the purchase of a franchise in order to create a long-term and far more predictable income stream.
- Of course, there is always the Bank of Mom and Dad—a trusted institution for generations. Parents generally know what their children are capable of and are often willing to become the franchise financier and general manager while their son or daughter operates the day-to-day aspects of the business. Over time, as their offspring gains experience, they usually relinquish control of the franchise to him or her—a transition that hopefully provides solutions and satisfaction to both generations. There are two primary structure options for setting up Mom’s and Dad’s funding:
- As a loan, often with the shares of the franchise as security; to avoid future misunderstanding and family stress, payment timing and terms need to be defined at the outset.
- Where Mom and Dad sign the franchise agreement and own the franchise, and later sell or gift the shares to their son or daughter once they can demonstrate operational proficiency. It is critical that a shareholder agreement and terms of ownership transfer gets put in place prior to the franchise purchase.
FranNet understands the situation that millennials face as they strive to make their mark in a rapidly evolving workplace. We have a number of possible franchise ownership options and an open door for ambitious millennials considering becoming a franchise owner. To start a conversation, please contact me today.