Franchisors Aim for Multi-concept Operators The Current Recruiting Target… High Income, Low Risk Franchisees
FranchisingAuthor :
Martin Greenspon 
Martin Greenspon founded M-Four in 1981. His lifetime career has included the manufacturing sector as well as being a Director of one of Canada's leading investment firms. He can be reached at martin@mfourintl.com
Franchisors Aim for Multi-concept Operators
The Current Recruiting Target…
High Income, Low Risk Franchisees
For decades franchisors have offered an open door and a hearty handshake to small-business people with the desire, intelligence, work ethic and money to become franchisees.
But the days of recruiting career switchers, the downsized, affluent retirees, college grads and mom-and-pop teams to franchising opportunities are largely over.
Franchisors, lenders and franchise consultants agree that in many franchises, the initial investment costs and related start up expenses for real estate acquisition and renovations, have soared beyond the economic capabilities of average people interested in franchising.
Even if these costs had remained flat, the facts are apparent, the main sources of wealth historically tapped by franchise candidates to open franchises have been decimated by the sub-prime mortgage fiasco, steep slides in the stock market, the extinction of pensions and the devaluation in individuals personal assets and as a result, the short term economic forecast does not bode well for franchisors, particularly those franchises that require substantial ‘start up’ costs.
Cost pressures on new franchisees make it too risky for franchisors to sign up neophytes to their system.
You just don’t see middle and senior management types leaving jobs with the kinds of pensions and severance packages that their peers even 10 years ago might of tapped to open a franchise. So newcomers don’t have that kind of capital to open even a single unit.
With banks making it extremely difficult to assist individuals in funding a single unit franchise venture, franchisors are now looking at multi-concept franchisees, tempting them with the opportunities of brand extension, knowing that they will get a higher quality individual at much lower risk.
Plus the economies of scale tells us that it takes considerably less service to support one individual who can open 10 units then it does to support 10 individuals with one unit each.
For those franchisors who deviate from the ‘conventional wisdom factor,’ for the on-going growth of their franchise brand, could be facing uninvited problems.
* * * *
- June 2010
MARTIN GREENSPON
Email: martin@mfourintl.com / P: 514-765-9604
The Current Recruiting Target…
High Income, Low Risk Franchisees
For decades franchisors have offered an open door and a hearty handshake to small-business people with the desire, intelligence, work ethic and money to become franchisees.
But the days of recruiting career switchers, the downsized, affluent retirees, college grads and mom-and-pop teams to franchising opportunities are largely over.
Franchisors, lenders and franchise consultants agree that in many franchises, the initial investment costs and related start up expenses for real estate acquisition and renovations, have soared beyond the economic capabilities of average people interested in franchising.
Even if these costs had remained flat, the facts are apparent, the main sources of wealth historically tapped by franchise candidates to open franchises have been decimated by the sub-prime mortgage fiasco, steep slides in the stock market, the extinction of pensions and the devaluation in individuals personal assets and as a result, the short term economic forecast does not bode well for franchisors, particularly those franchises that require substantial ‘start up’ costs.
Cost pressures on new franchisees make it too risky for franchisors to sign up neophytes to their system.
You just don’t see middle and senior management types leaving jobs with the kinds of pensions and severance packages that their peers even 10 years ago might of tapped to open a franchise. So newcomers don’t have that kind of capital to open even a single unit.
With banks making it extremely difficult to assist individuals in funding a single unit franchise venture, franchisors are now looking at multi-concept franchisees, tempting them with the opportunities of brand extension, knowing that they will get a higher quality individual at much lower risk.
Plus the economies of scale tells us that it takes considerably less service to support one individual who can open 10 units then it does to support 10 individuals with one unit each.
For those franchisors who deviate from the ‘conventional wisdom factor,’ for the on-going growth of their franchise brand, could be facing uninvited problems.
* * * *
- June 2010
MARTIN GREENSPON
Email: martin@mfourintl.com / P: 514-765-9604