A: Why In today’s workforce, people tend to change careers and jobs quite a bit. According to Workopolis, a shorter stint at jobs has become the standard, as 51 per cent of people now stay in any one role for approximately two years. Millennials will, on average, have roughly four jobs over their first 12 years in the job market. On the whole, it is expected that Canadians will hold around 15 jobs over the life of their careers.
As tenure in a single job has become shorter, careers now have greater fluidity. But this fluidity – whether or not by choice – can lend itself to career opportunities. Owning a franchise business is one of those opportunities and can be impactful for those looking for a career change, at any stage of their professional lives.
Before looking at the opportunity that franchising presents, it is worth looking at how different franchise models are best suited to people at various life stages.
Tier 1 franchises – a franchise that’s a household name – often have a higher price tag and are more selective about who they accept. More often than not, these types of franchises select people who have been self-employed previously, have significant assets, and are looking for a new challenge or to add to their existing portfolio of investments.
The health and lifestyle focused franchises – tier 2 – tend to attract a younger demographic who are looking to start out, who have come into some money recently, or have come to realize that they were looking for something more than what their current job could offer.
Tier 3 franchises – quick service restaurants (QSR) – are another popular option as they have lower entry barriers and there is a large selection of franchise types. These are geared to those new to the country and those looking for networks that are growing.
It’s important to keep in mind that, when starting any franchise, there will be an upfront capital commitment. The amount of capital required by the franchisor will vary depending on the franchise. For franchises that are well known, a franchisee may be looking north of $750,000. For health and lifestyle focused franchises or QSRs, the investment may sit under $450,000.
While there is an upfront cost, franchising has some distinct advantages for those looking to start their own business and pivot their career.
Proven business model
One of the key advantages of starting a business under a franchise model is that the franchisee is working with a proven business model. The franchisor will have a playbook to helping with franchise success – anything from marketing collateral, to hiring best practices, to operation guidelines.
There is still a lot of work on the franchisee’s part in order to turn a franchise business into a success, but not having to start from scratch can be incredibly beneficial.
Data and analytics
Another advantage of transitioning to a franchise business is tapping into resources that the franchise network will provide, such as data and analytics on franchise performance.
For franchisees, data can be a powerful tool and provide insight into the strategies that help fellow franchisees at a store level. The franchise brands that leverage data (and analyze that data) can tailor systems for various regions or cities. If the franchise brand deploys data and analytic capabilities, it can be incredibly valuable to tap into that information as much as possible. Now more than ever, data lays the groundwork for a successful business.
While not applicable completely across the board for franchise businesses, some franchises – health and lifestyle focused and QSRs – have a smaller hurdle to profitability relative to other franchises and starting a business from scratch. The lower the profitability hurdle, the quicker the franchisee will be able to make and (hopefully) keep the business profitable.
To help with profitability, it’s a good practice to have a business plan in place. With a business plan, the franchisee can map out what’s needed to attract customers and determine the number of people that need to consume a service or purchase a product to be successful and start seeing growth.
Understanding your sales cycle is also crucially important. To help you better understand the cycle, look at whether the business is seasonal (so you will know when to expect ebbs and flows) and how dependent it is on variables like foot traffic. If a chunk of your business depends on getting customers in the door, look to supplement that with an online storefront for when traffic might be lighter. This will be especially important, as consumer preferences change as a result of prolonged social distancing from COVID-19.
When in the midst of a career transition, franchising can be an exciting opportunity. In a lot of cases, as an owner, it can provide greater work-life balance and flexibility. If done right, it can be an exciting opportunity for business success.
Director North American Industry Sectors, Franchise Finance
BMO Bank of Montreal (BMO)