By Gary Prenevost
While there are a number of ‘micro-trends’ within certain sectors of the Canadian franchise industry, the growth of franchising will always be driven by people who are not fulfilled in the work they do, or by those who are not satisfied with their salary. This article will discuss three macro trends regarding the changing patterns of who is buying a franchise, and some of the reasons why these shifts in buyer patterns are happening including:
- The tremendous increase of millennials investing in franchises;
- The rise of women purchasing franchises—especially in the last 15 years; and
- The number of individuals in semi-absentee ownership as a hedge against career uncertainty.
The country is experiencing the lowest unemployment rate it has seen in decades, and one would expect during such a strong employment landscape, interest in franchise ownership would curtail. In fact, the dream of Canadians owning their own business continues to be realized at a surprisingly brisk pace.
Millennials purchasing franchises
In 2018 and 2019, there was a tremendous increase in the number of millennials exploring franchise ownership. Ownership is perceived as:
- A means to gain significantly greater work/life balance;
- As a way to have more control over their long-term career; and
- Having a career which is purpose-driven and aligned with their core values.
Certainly, the 20-somethings have rarely saved up the capital required to buy a franchise, but many of them demonstrate high entrepreneurial drive and look to the ‘side hustle’ to create additional financial opportunity and build better skills. Side hustles are not meant to be of substantial wealth creation.
As millennials enter their 30s, they have typically built a reasonable corporate skill set, but also recognize the likelihood of staying employed with one company for many years is rarely realistic; instead, they are seeking new jobs every 12 to 36 months—this lack of control and long-term career uncertainty creates a tremendous amount of stress. At this point, young adults see franchise ownership as a proven way to become self-employed.
Once they have saved between $75,000 and $100,000, the world of franchising opens up significantly for young adults. At the lower-cost end of the spectrum, home-based service businesses (niche fitness, home improvement, education, etc.) can range from $75,000 to $150,000 to start, and can provide tremendous lifestyle flexibility.
Alternatively, if this group accumulates more than $150,000 in savings, or if they have parents or family members who can help them secure loans for their businesses, then they are able to access more traditional franchises, which often require an investment range of $150,000 to $400,000. Many of these types of companies qualify for the Canada Small Business Finance Program, thus providing access to significant capital while mitigating risk to the family wealth pool.
Historically, research shows women have a lower risk tolerance than men, but as they experience the flattening of corporations and more competition for good jobs, their liability capacity is changing. Recently, the author has seen more women consider franchise ownership than any time in the past 15 years. According to the International Franchise Association Franchise Education and Research Foundation, between 2011 and 2017 female franchise ownership increased by 83 per cent, while male ownership rose by 13 per cent. Women see self-employment in franchising as a way to:
- Achieve a work-life balance. The reality is the majority of women still look after their family (i.e. young children, aging parents). With franchise ownership, once the business is established females can manage their work and family time.
- Shatter the glass ceiling that still exists in corporate Canada. Many women see franchising as a way to truly demonstrate what they are capable of, and to not be restrained from higher-level opportunity, accountability, and responsibility due to their gender.
- Eliminate wage disparity. According to Statistics Canada, the current gender-based pay disparity is 29.3 per cent (women generally earn $.71 for every dollar that men earn). With franchise ownership this is simply not the case—the owner gets to set her own pace, and is able to realize annual financial results that are more directly commensurate with efforts, so she is able to earn what she is truly worth.
- Create independence and greater wealth. This is accomplished by building and leading a strong team; some women seek even greater wealth creation through multi-unit ownership.
Females generally buy the same types of franchises men do; however, there is a higher interest in service-based franchises geared towards women (i.e. wellness/spa, beauty, niche fitness, etc.).