There’s a whole new generation ready and willing to bring fresh entrepreneurial spirit to franchising, says Ryan Hicks
At the ripe old age of 32, James “Buck” Duke rose during the destructive aftermath of the American civil war to become the undisputed king of the global tobacco industry, There were thousands of rag-tag tobacco brands and independent farms at the time, but the Duke systematically gained market share and amassed an empire. In the same way that Duke rapidly scaled his business (and an entire industry) to new heights, there are interesting forces waiting in the wings of the modern business landscape that could do the same for franchising. I’m talking about Millennials and Generation Z.
Franchising is a business model that allows organizations to quickly scale. Today it represents only 3% of our gross domestic product, yet it touches a great number of industries. We are at an interesting point in history; this little thing called the internet has changed the business landscape. It is easier than ever to start a business, yet the market is noisier than ever and it’s hard to compete in it. However, I believe there are forces at play that will propel the franchise business model forward towards unprecedented growth.
Entrepreneurship is more popular than ever
In the eyes of the 100+ million or so Millennials and Generation Z, entrepreneurship is in. It is cool to be an entrepreneur. Entrepreneurship support organizations are popping up everywhere: university centers; new venture funds; incubators. There are even corporation-backed accelerator programs that put money into small technology teams which contribute to research and development.
According to the Gust Global Accelerator report, in 2015 there were 387 accelerator programs in the world. Just one year later there were 579 such programs. Membership of incubators, accelerators and university programs spiked to an all-time high. For example, INBIA (the International Business Innovation Association) has spiked to over 2200 member organizations in more than 62 countries.
There is a massive values alignment between our youth today and the franchise community. Millennials and Generation Z want to be entrepreneurs. They crave a purpose bigger than themselves. They are curious and have a thirst to learn. They want (and need) frameworks that they can plug in to. If only we had a business model based on all of the above…
Franchising needs this new blood
Despite its cultural acceptance, entrepreneurship is actually at a 40 year low according to US Census data. In 2006 there were roughly 615,000 new business starts. The last Census data (released in 2016) showed 452,835 new business starts, which amounts 24% fewer compared to 10 years prior. Historically, the data also shows that eight out of 10 new businesses fail within the first five years, even in a surging economy with low unemployment rates. So why does franchising represent only three out of 100 of new business starts?
The modern education system is flawed
How is it sustainable that most students graduate college with massive amounts of debt and little idea of what they really want to do? Let’s take, for example, Peggy from South Carolina. She went to a highly-respected university and graduated with honors. She had a leadership position in student governance while in school, then went on to get her Masters in Business Administration. She graduated with $200k in debt.
After two short years she realizes she hates business and has a passion for interior design. She’s 27 years old and now has a mountain of debt. This story is happening all the time and it should be a massive red flag. But contrast Peggy with Amanda from New Jersey. After high school, Amanda went directly to work as an apprentice buyer for a boutique women’s fashion retailer. She worked her way up to owning a store of her own, learning how to manage the operation, solve problems and put out fires. On her 27th birthday she decided to sell the business and pursue interior design.
Now imagine Peggy and Amanda are both are applying for a job. You are the hiring manager and you have the two applicants in front of you. One is an MBA from a respected school. All of the right boxes are checked. The other applicant has no formal education but has managed an actual business. Instead of spending six years being prepared by professors spitting theory, Amanda spent that time years cutting her teeth in the school of hard knocks, learning through experience. Who are you hiring?
Instead of convincing our youth that they should spend six years and $200k on an MBA, what if we convinced them to spend $25k for a set of trade skills and showed them a path to own their own business? Wouldn’t it be neat if, at the end of each trade program, students could apply for funding to operate their own business? Or, worst-case scenario, enter a focused job market? What if capital institutions rallied behind these notions? What if corporations stepped up to the plate, much like they have with accelerator programs, to help fund these programs? Couldn’t these act as a farm league for awarding franchise licenses?
I’m not even remotely asserting that everyone should be a franchisee. What I am asserting is millions of youth want to be entrepreneurs yet lack the training and education needed. I predict that we will see capital and education rally behind the right training, and this will produce more franchise growth than we’ve ever seen before.
ABOUT THE AUTHOR
Ryan Hicks is the host of Modrn Business Podcast and executive producer of the upcoming Modrn Business TV and Book series. Mr. Hicks serves as the VP of Business Development for Rallio.com, the leading Social Media Management Platform for franchise chains, and is a Franchise Advisor and business consultant for Solink.com
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