Franchise Buying Guide

The Wide World of Franchisees

Today's franchise buyers are a diverse group--from corporate refugees to individuals born after The Beatles split up.
Presented by Guidant Financial
Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

It doesn't take much more than a look around at the countless Subway and Cold Stone Creamery franchises dotting America's landscape to recognize the dominant role that franchises play in our society. The brands are tried and true, but who are the faces behind these franchises? Who are the people purchasing these businesses and running them day-to-day? We surveyed the franchisors who submitted applications for this year's Franchise 500®, asking them to identify their primary franchise buyers. Their responses overwhelmingly pointed to four major buyer categories: second-career executives, young entrepreneurs, women, and minorities. After speaking with people directly involved in the franchise industry, we discovered how these four dynamic groups are forging their paths in franchising.

Second Time Around
Downsized, laid off or just plain tired and fed up-whether due to economic swings or a general disenchantment with the corporate world-more people are choosing to go into business for themselves. An overwhelming 77 percent of the franchisors we surveyed indicated that second-career executives are among the primary buyers of their franchises today.

That was the case for Dennis Huff, 50, and Ed Flanders, 46. After extensive careers involving executive positions in sales and marketing and engineering, respectively, they decided to take the plunge and abandon their high positions on the corporate ladder to become their own bosses. They looked into various franchises, ultimately deciding that, due to the strong demand for pet services and the rapid growth of the industry, a pet-grooming business was for them. They opened an Aussie Pet Mobile franchise in November 2005 in Irvine, California, and without ever washing a single dog themselves but managing employees who do, are already among the top Aussie Pet Mobile franchisees in the nation, growing their business to eight vans. Huff and Flanders' impressive success is due in part to their ability to grasp the bigger picture and enter the franchise with aggressive plans for growth. From their previous experiences, they also understood the importance of a solid business structure and were prepared for the initial costs and the time it would take to start making money-a factor Huff says many franchisees underestimate.

According to David Louy, executive vice president of franchise sales at Aussie Pet Mobile, second-career executives have been among the company's primary franchise buyers since the mobile pet-grooming business started actively franchising in the U.S. in 2000. According to Louy, it's the franchise's business model that former corporate executives find especially appealing. "There's no receivables, there's no real estate, there are few employees, it's a repeat business, very scalable, not subject to economic swings and there's not a lot of competition out there," he says. "People who have been in the corporate world for a period of time recognize these as things that have value."

Louy predicts that this group of franchisees will continue to be primary buyers, and he can already see where some of them are leaving their marks. "The stronger franchisees are starting to buy out others," says Louy. "It's kind of like the corporate world all over again, but on a personal level."

The transition from executive to business owner did require some adjustments for Huff and Flanders, though. The duo no longer has access to an HR department, a legal department, or an operations and finance team. "Your administrative assistant-that right-hand person-is so important. They set up dates, do your expenses, keep you organized," says Huff. "You don't really appreciate that until you don't have that service anymore."

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This article was originally published in the January 2007 print edition of Entrepreneur with the headline: Look Who's Buying.

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