As the school year draws to a close, it is anticipated that more than 2 million bachelor’s and associates degrees will be conferred to graduating college students, according to the National Center for Education Statistics. Before venturing into the “real world” as (gasp!) adults, new alumni traditionally find themselves entertaining two post-college options: continuing their education or finding a job. A handful of graduates, however, might entertain another option: owning their own business.
But most entrepreneurial-minded young people typically encounter two road blocks in pursuit of this goal. First, they probably don’t have the experience or know-how required to run a successful start-up business on their first try.
The second common road block for young entrepreneurs is having adequate financial resources to open a franchise, as the initial investment can easily require hundreds of thousands of dollars.
To maximize their chances for a strong start, aspiring entrepreneurs might consider opening a franchise. Diligent research can turn up franchises with franchise fees starting as low as $20,000, and potential for high returns.
“A great franchisor has gone out and developed all of the tools that you need to start a business,” Lori Kiser-Block, president of FranChoice, said. “They’ve developed the marketing system, the training and operation system, the brand, [and] the marketing tools you need in order to sell that business. They’ve made all of the mistakes for you.”
A little advice can go a long way. NuWire has picked five types of franchises that might best meet the personal and financial qualifications for young people—but we’ll leave the task of pitching business plans to their parents and other family members or friends up to them.
1. Pet care
While the story of late Leona Helmsley and her multi-millionaire dog is not the norm, today’s pet owners are taking extremely good care of their furry friends. Pet care makes up a $42 billion industry, “the seventh-fastest growing industry in America,” according to Paul Mann, CEO and founder of Fetch! Pet Care.
“There’s a huge business opportunity because…baby boomers and the dual-income household folks are consistently spending more and more on their pets…even in downward recession periods like this,” he said.
In addition to the potential for growth, pet care franchises tend to be low-cost and low-risk. The franchise fee for Fetch! Pet Care is set at $10,000, and a franchisee will typically need an additional $7,000 to $10,000 to cover operating costs for the first year, according to Mann. Furthermore, Fetch! Pet Care, like many other franchises in the pet industry, is a home-based operation. It’s a turnkey business where a franchisee is hiring staff to go out and take care of people’s pets, not bringing clients—or their pets—into their own homes.
“All of our franchisees operate from home, and that not only reduces their operating costs but it gives them flexibility to enjoy family and work when they want and not have to commute,” Mann said.
And for young people with little business experience, learning the basics about running a pet care franchise can be fairly straightforward.
“What’s great about our business is that it’s not rocket science,” Mann said.
2. Painting services
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Personal outsourcing may be a new business trend but hiring outside help for home improvements, such as painting, is anything but a novel idea. Furthermore, demand for painting services—an $82 billion industry—tends to be strong and stable, even during periods of economic uncertainty, according to Pete Barkman, vice president of franchise recruitment for CertaPro Painting.
“When the economy is down, what you’ll find is that people tend to take care of what they’ve got,” and consequently, business “has grown tremendously over the past couple of years,” in spite of a national economic downturn, Barkman said.
CertaPro has “had tremendous success stories with people under 30,” Barkman said. Young franchisees are geared towards putting a lot of energy into the business, but the franchise itself is a relatively low-cost investment. The initial franchise fee is $40,000; during the course of the first six months, a franchisee will invest more than $100,000 in the business, often using the revenue that is generated in that same period of time to provide the needed capital.
“We wouldn’t be able to attract people who are younger to this business if they don’t just have the money,” Barkman said.
CertaPro doesn’t require a “lot of machinery and equipment,” and franchisees can start out with a home-based business or modest office space.
“It’s not required that they have a tremendous amount of space because it’s a mobile business,” Barkman said. “[And] we’ve invested a tremendous amount of money, time and talent into building a technological infrastructure that allows for that business to operate virtually.”
3. Children’s Services
To quote Herbert Hoover, “Children are our most valuable natural resource.” And parents are investing in them—heavily. The U.S. Department of Agriculture estimated that families making upwards of $70,200 spend an average of $269,520 to raise a child from birth through age 17 as of 2004–and that’s not including four years of college tuition, an amount that could easily pay for a house.
Needless to say, the children’s services industry is booming, and young investors can take advantage of a wide variety of opportunities in child-related franchises, many of which are home-based. Educational services may present an exceptional opportunity for growth.
“The public school systems are cutting out a lot of those additional services such as the arts and music, and so those are areas of franchising that are becoming very popular,” Kiser-Block said. “People can go out and buy those services for their kids.”
And demand for educational services such as music lessons remain constant, even during slowdowns in the economy.
“People will stop going out to eat and stop a lot of other things before they stop their kids’ music lessons, because they see it as an integral part of their music education,” Matt Wyman, president of Virtuoso Music, said.
Many education-related franchises are home-based and low-cost investments. Virtuoso Music, for instance, requires a total investment of $30,000 to $50,000 investment, according to Wyman. Franchisees for Club Z! In-Home Tutoring, the second highest-ranked franchise in the tutoring industry in 2006 for Entrepreneur Magazine, can open a franchise with a total investment of approximately $30,000, according to FranchiseGator.com.
Franchises that provide entertainment services for children also present opportunities for low-cost investments. Space Walk Inflatables, which rents out inflatable amusement for children’s parties, requires start-up costs of $2,500, according to Entrepreneur.com.
4. Non-medical home care
It’s no coincidence that our top four types of franchises happen to be in service industries: Service industry franchises tend to be lower-cost and lower-risk investments than retail franchises, which incur additional expenses for inventory and retail space. For young investors who are interested in a particularly lucrative and low-risk industry, non-medical home care for seniors certainly appears to fit the bill.
“Very rarely do you see an industry like this that is already stable [and] has yet to begin its growth curve,” Gary Kneller, co-founder, president and chief franchise developer for CareMinders Home Care, said. “Normally when an industry is proven and stable, the growth curve begins to flatten out, [but] the projection is that this [trend] is going to continue for at least the next 40 to 50 years.”
Advances in modern medicine and health education are extending life expectancies, and the nation’s health care system is bracing itself for an elderly population for which it’s not quite ready. This demographic phenomenon has consequently opened the door for senior care and non-medical home care franchises to flourish.
Franchise fees for low-cost senior care franchises can range from $20,000 to $30,000, with total required capital to invest ranging from $40,000 to $80,000. Although non-medical home care is a mobile business, the sensitive nature of the home care industry discourages franchisees from operating out of their homes.
“We’re finding more and more [that] the national companies such as us do not want people to do this off their kitchen table,” Kneller said. “People want to see that you’re really professional.”
However, required office space is relatively minimal, approximately 1,000 to 1,200 square feet, “about the size of the average dry cleaners,” Kneller said.
5. Existing franchise businesses
Buying an existing business as opposed to starting from scratch has been the conventional wisdom for aspiring entrepreneurs. Existing businesses are generally lower-risk; they may have established some sort of cash flow and probably won’t incur high costs for building out new office space.
Buying an existing franchise business offers the added benefit of branding, and often, franchise support from corporate headquarters. The biggest advantage for young entrepreneurs with limited access to capital, however, is the possibility of obtaining seller financing in purchasing the franchise, especially if the previous owner is eager to get rid of the business.
Often, the opportunity to purchase an existing franchise business is a matter of being in the right place at the right time. Charles Sipe, 24, and his business partner, Irene Baluyot, 23, for instance, were offered the opportunity to acquire a Designed Dinners franchise in Renton, Wash., when the owners—Baluyot’s former employers—encountered difficulty selling the business.
The terms of seller financing have yet to be worked out, but the general plan is for the two new owners to pay $30,000 over five years—a considerable discount from the original $80,000 that the previous owners bought it for.
Sipe, who majored in business administration with a concentration in marketing at the University of Washington, will have the opportunity to put his education to the test.
“[Owning a franchise] will allow me to manage a marketing strategy, whereas in other companies I probably wouldn’t have that kind of freedom or responsibility,” he said.