When Junior can’t find a job, some try franchising with Senior
Mom-or-dad and grad pairs are rising as franchisees. Here’s how to make it work—and how franchise systems can attract this emerging type of owner. One no-no: Operations manuals printed on dead trees.
On a fishing trip with his father two years ago, Keith Allen proposed they buy a franchise together and return to the work Keith loved while in college. “I said if there’s any way I can make a living in the pizza business,” he recalls.
As a marketing student at the University of LaCrosse in Wisconsin, where he graduated in 2006, he worked at a pizza shop, but not the most popular spot in town. That was a Toppers. “They were just crushing us,” he says.
Paul Amell, left, made sure his son, Jason, worked every job at his Checkers/Rally’s stores.
So they got a Small Business Administration loan in his father’s name, Myron Allen, and opened a Toppers franchise in Rochester, Minnesota, nearly a year ago. His mother, Kristi, a registered nurse at the famed Mayo Clinic, pitches in between shifts. His soon-to-be wife, Kari, a biologist who researches zebra mussels at Mayo during the day, works the shop at night.
And Keith, who spent time after college in various sales jobs, including for the Yellow Pages, is crazy busy and satisfied. “I never had my heart in it,” he said about those other jobs, and he’s already scouting for their second location.
The Allens are the embodiment of a growing trend toward parent-child teams purchasing and/or operating franchises together. They’ve always done so, of course, especially in the restaurant sector where mom-and-pop shops—plus uncles, kids and grandkids—are legion. But recent economic trends are accelerating the phenomenon.
Unemployment or under-employment among those under 25 with bachelor’s degrees tops 50 percent, some studies say, since the financial sector’s collapse in 2008.
Add the rising number of buyouts for seasoned executives over 50 that provide lump-sum capital—and the average length of unemployment for workers over 55 now stretching to more than a year, and the mom-or-dad and grad pairs in franchising are growing.
Keith Allen, left, with his father, Myron.
Karen Spencer, who advised hundreds of family-owned franchisees when she operated FranSystems, said about 20 percent of new franchise buyers were parent/child teams during the 1990s and 2000s, but she noted a jump to as many as 50 percent within the last five years. She believes few franchise systems have recognized the trend, and so are missing an opportunity to recruit this emerging type of franchisee.
The key difference, Spencer says, is a younger generation driving the decision about which brand to buy, not simply joining the parents’ business. They want a hip brand that serves food they like to eat or sells products they like to buy, with a solid social media presence that appeals to young people. And forget about a 50-page operations manual printed on dead trees—it better be available online to attract the youth vote.
They may be less keyed in than their elders to return on investment or profit-and-loss statements. They are also unlikely to have any money—all points where the older generation may shine. If it’s going to work, Spencer says, both birth cohorts must agree.
“Everybody has to be on board. When kids say, ‘I want this’—if the parents are not 100 percent on board with what is happening, it will fail,” says Spencer, who is now CEO of YeahBurger, a young franchise concept in Atlanta.
She warns against undercapitalizing a new venture, a common mistake if the elders come from a corporate setting and are nervous about funding a business, especially operated by a child they may see more as the screw-up who never made curfew than as an accomplished professional.
Parents who guard all their operational secrets, too, can be a problem for a younger generation coming up. She recalls advising a Burger King franchisee family whose son had worked in his father’s operation as general manager and area supervisor, then wanted to purchase his own stores when Burger King began selling. “He had never even seen a P&L because his father held that so tight to the chest,” Spencer says.
Gaining respect from the franchisor can be tough, if the parents are the only people to interact with corporate, something Spencer herself inadvertently demonstrated at a recent seminar on the topic co-sponsored by Franchise Times. At one point an audience member challenged the panelists. “Stop calling these people kids,” he said, about the sons serving as panelists in two father-son pairs. “They’re not kids, they’re partners.”
Spencer and other experts advise frequent discussion of roles that involve all family members, buy/sell agreements drafted by attorneys that will kick in if something unexpected happens to any of the partners, and an ownership stake for the younger generation that can start small and grow over time. Until that stake for the children nears 40 percent or so, franchisors will look to the parents instead as the decision-makers.
Working every role
Jason Amell was working for Countrywide Financial, the mortgage outfit that infamously crashed along with other players after the financial collapse of 2008. Abruptly laid off, he became a statistic: a college-educated 20-something with a finance background, suddenly out of work and burned by corporate America.
He decided to join the operation of his father, Paul Amell, president of Metro HNN, with three Checkers/Rally’s restaurants at the time in the metro-Detroit area. “I thought, who better to grow with than my son,” Paul recalls.
They’ve since expanded to six locations with two more planned for later this year, and Paul is bullish on the economics of the brand, demonstrating the financial savvy that experts say often characterizes the older generation in the franchisee pairs. “The cost of entry is less than other hamburger chains. We’re able to go into places that others can’t—it’s a half acre of property with a double drive-thru.”
But the transition wasn’t easy. “It was set up in a way I didn’t quite understand at the time,” Jason says. “He made me learn everything from the ground up. He wanted me to see what it took.”
Jason worked every job, finally making it to general manager and now the owner of a 10 percent stake in the business. He is ranked the No. 1 GM in the Checkers/Rally’s system, according to a spokeswoman for the brand. “It gives me credibility,” Jason believes, “because I know everything.”
Paul says that also helps with another challenge in a family-owned business: Building respect among division managers and others, who know the top spot will go to the children one day. “Because of his success in his leadership role, even though we have GMs with more experience, they all have a respect for what he’s done in the market,” Paul says. “I was very conscious of that. I didn’t want people to think it was handed to Jason.”
One challenge of a family-owned business is impossible to overcome, however: keeping family, business and life apart, and both the Allens and the Amells say they don’t even try. “It’s hard to separate personal and business,” Paul Amell says. “It seems to be in our household, it’s always a Checkers world.”