Gift for parents, grads: franchise partnership
Multigenerational franchises are becoming increasingly common for job-seeking parents and children who have an entrepreneurial urge but not the experience or confidence to start a business alone.
The New York Times
Late one night in January 2012, Paige Palmer called her mother at home, crying.
She was entering her final semester as a communications major at St. Mary’s College of California in Moraga, and neither she nor her friends were finding work. The job market was terrifying.
“In this culture, your whole life is planned out until you graduate from university,” Palmer, 22, said. “That time had come, and I didn’t know what was at the end of the tunnel.”
Palmer’s concerns found a receptive audience in her stepfather, Tony Uzzi.
In June 2010, after 25 years in the pharmaceutical industry, Uzzi, 55, had been laid off from his job as senior vice president for sales at a pharmaceutical company based in Switzerland.
He had spent a year playing golf and trying to start a consulting career, but he had grown bored. Going back to the corporate world was not really an option.
“Not a lot of attractive job offers came my way,” he said. “None. I was 53. I had been making several hundred thousand dollars a year, and no one wanted to pay me that.”
Eight months later, Uzzi and Palmer put down $130,000 of Uzzi’s money to open in Mission Viejo, Calif., a franchise of Nurse Next Door, a home-health-care service based in Vancouver, B.C.
With that, they joined a growing number of parent-child partners who have responded to poor job prospects by buying franchises together.
During the first month in operation, Uzzi said, they took in $23,000 in revenue, a first-month record for Nurse Next Door. Six months later, he said, they were averaging about twice that amount.
Concrete figures on multigenerational franchises are hard to come by. But anecdotal evidence suggests they are becoming increasingly common for job-seeking parents and children who have an entrepreneurial urge but not the experience or confidence to start a business alone.
Rick Bisio, a franchise consultant in Bradenton Beach, Fla., and the author of “The Educated Franchisee,” said that 10 to 20 percent of the franchisees he places start as parent-child pairs and that the number has risen since the economic turmoil.
An analysis by The Associated Press found that in 2011, 53.6 percent of those with bachelor’s degrees under the age of 25 were jobless or underemployed, up from 41 percent in 2000.
And according to the U.S. Bureau of Labor Statistics, the average length of unemployment for workers over 55 has risen to more than a year.
“In the U.S., the economy has been rough since 2008,” said John DeHart, co-founder and chief executive of Nurse Next Door. “You have a lot of seasoned executives getting packages, and they’re looking for new careers. And you have this disproportionately high unemployment in the under-25 group. With that you get the dad/grad trend.”
DeHart said four of the 11 franchises his company has opened in the United States in the past year have combined parents and recent graduates.
Larry Leonard is one such older worker who turned to opening a franchise with his children after a job loss. Leonard, 59, had been in the steel business for 38 years when he was “downsized” from his job as president of a small steel company in Chicago Heights, Ill.
After an executive-search firm told him it would take at least eight months to find another job, he and his family turned to CPR Cell Phone Repair, a telephone- and tablet-repair franchiser.
The expected cost for the first store is about $125,000, said Leonard, who bought the rights to open eight stores over the next five years.
His wife, Paula, will run the front desk, Leonard said, while his older son, Russell, 29, will be responsible for marketing; his younger son, Philip, 27, for technology; and his daughter, Carolyn, 24, for social media.
That division of labor is common among multigenerational franchisees, with parents typically handling jobs that require local connections and the children taking care of day-to-day operations and online marketing.
“I thought, I’m going to be 60 and if I could spend the last five to 10 years of my working life building up a company that would help me in retirement and help my children, I would investigate,” Leonard said from a soon-to-open branch in Orland Park, Ill.
“We could make $30,000 to $50,000 per store in profit. It will take a few stores to match my old salary, but I’m building for the future, not just for today.”
Laid-off parents and their unemployed children are often attracted to franchising because it offers easy-to-follow systems. But that guiding hand has a price.
The overall cost of opening a franchise can range from roughly $50,000 for a pet-services store to some $445,000 for a restaurant, according to data from the industry magazine Franchise Business Review.
In addition, franchisees usually pay 5 to 8 percent of their revenue in royalty fees to the franchiser, said Eric Stites, chief executive of Franchise Business Review.
“While franchising can be profitable, it’s a long-term investment,” Stites said. “Most franchisees will need seven to 10 years or longer to grow a successful business to a point where they can potentially sell it and make a solid return on their investment, and clearly, there are no guarantees.”
The family dynamic can also be tricky. When Millie Vazquez’s two adult children, Julio, 30, and Alvaro, 34, moved home several years ago and were looking for work, she decided to open a third Blimpie franchise in Paterson, N.J., not far from her first two.
She quickly ran into trouble with her sons, who wanted to create off-menu sandwiches and go outside the Blimpie system in other ways.
As she fought with Alvaro, who was managing the store, she says his hair began to fall out from stress: “At one point it got so bad, I said to Alvaro, ‘You know what? You’re fired.’ ”
After leaving briefly, Alvaro returned and the two brothers retook the Blimpie training program; the store is now “a gold mine,” Vazquez said.
For Palmer at Nurse Next Door, moving from the freedom of college to a job that required her to be constantly on-call was a difficult transition.
“This isn’t a normal 9-to-5 job.”
In the end, though, she said that taking on the responsibility was worth it. The franchise, which opened in September, is on course for $500,000 in first-year revenue, Uzzi said.
Meanwhile, many of Palmer’s college friends have not stopped looking for work.
“All of my friends have left the area in search of jobs,” she said. “Or they’re baby-sitting.”