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Are Franchises The New Startups? These Small Business Ideas Might Convince You!

Struggling economies have always encouraged entrepreneurship.

Microsoft. Apple. Amazon. Burger King. FedEx. Hyatt.

All of these companies were started in a recession.

The intrepid founders of these businesses, each of whom has built a world renowned brand, didn’t tuck in their entrepreneurial spirit and settle for an unsatisfying career. They made the best out of their available resources to turn a difficult climate into a profitable enterprise and a meaningful career.

But entrepreneurship isn’t limited to the startup realm.

You don’t have to wear a hoodie, slam energy drinks and launch your company out of a garage to earn that label. Business ownership in any form is a risk, and that’s precisely what defines an entrepreneur. Someone who exploits business opportunities in the face of uncertainty.

Is it possible that franchises are the new startups? We can’t prove that with data. But here’s our theory on the matter, along with a few small business ideas to back it up.

Startups are hot, but franchises ain’t cold

In the past several years, we’ve seen dozens of success stories about modern sharing economy startups like Airbnb and Lyft making waves with innovative technology, approachable brands, engaged communities and empowered employees. And we don’t want to take anything away from the amazing work those kinds of companies have done. Who doesn’t love a taxi that hails you?

Instead, we want to stress the fact that startups aren’t the only winners. Franchises have also continued to serve as a critical growth engine for the economy in the past several years. Franchises might not be as glamorous as the well funded tech startup run by three college dropouts whose combined age is still younger than you, but that doesn’t make the model any less profitable for potential owners.

The International Franchise Association’s research in the past few years forecasted impressive growth, showing that the franchise sector grew faster than the overall economy in 2017 and 2018 Yes, franchising has hit a temporary standstill right now with the impact of coronavirus on the economy, like every other sector. The downstream effects of the current economic downturn will no doubt play out for some time, both operationally and financially.

And yet, take the example of the restoration industry. During quarantine, people may be confined to their homes, but property damage still happens. And if you hold a mortgage, you’re obligated to get it fixed.

That’s why franchises like PuroClean, a business that gets most of their jobs from third party payers such as insurance companies, are thriving despite the economic downturn. We recently spoke with their director of franchise development to see how things were going, and he told us that they’re seeing record lead volume right now. Clearly, PuroClean found a way to thrive, even in the wake of the pandemic. Talk about a recession resistant small business idea!

In short, startups may be hot, but franchises ain’t cold.

The upside to the franchise business model

Zooming out for a moment, let’s return to our original idea of entrepreneurial risk. Consider several of the differences between startups and franchises, from a business model standpoint.

First, franchises pose a higher probability of success. A franchise is an already established business model. Whereas starting an unproven, new business from scratch, that’s typically more risky.

Entrepreneur once reported that one quarter of startup businesses fail within their first year, half of the remaining fail within five years, and approximately thirty percent of the remaining last ten years. Part of that is because there’s no roadmap. Now, some entrepreneurs may relish that level of freedom to execute whatever plan they want and ascend to legendary heights.

But take it from someone who spent the first fifteen years of his career as an entrepreneur.

There is such a thing as too much freedom. Limitless potential to do anything you want is expensive, stressful and risky. Just ask my stomach ulcers.

You know what’s not stressful? Joining forces with a brand that already has national presence and recognition who runs system wide advertisements.

And you know what else isn’t stressful? The knowledge that your parent company will provide extensive support for you, from marketing to operations to training to human resources.

Property Management Inc, the leading property management franchise, made headlines recently with their campaign to provide financial relief to help franchise owners ensure that they emerge stronger on the other side of the current economic downturn. They have been offering waivers for rental fees, more liberal approval processes for investments, and so on. It’s clear that the parent organization of the franchise is preparing to help owners ramp back up as soon as it's safe. Startups don’t typically offer that kind of support, because there is no parent company, and there is no operational precedent. Founder, investors and board members of startups are invaluable, but it’s a different type of value.

And please note, we are not suggesting that the startup mode is a poor one. FranchiseHelp is itself a startup. We love being a startup, we’re thriving as a company because of that mindset and model. The challenge from an entrepreneurial standpoint is for people to gauge their next career move around their risk profile, among other factors. If you’re the kind of person who doesn’t require as much support and structure from the powers that be, then franchising might not be your best option.

On the other hand, stories like Blo Blow Dry remind us how powerful the franchising model can be, particularly in a down economy. This franchise recently launched a gift card give back initiative, which is targeted at supporting local hospital workers and other essential healthcare personnel working on the frontlines of the coronavirus pandemic. For every gift card valued at fifty dollars or more purchased from any of the participating Blo Blow Dry Bar locations, a blowout will be donated to a frontline healthcare worker within the respective local communities of where the gift card was bought.

This is the kind capability franchise owners gain access to when they become owners. They’re trading off a certain amount of freedom to be able to react to this kind of crisis with that level of generosity, but for the right person, the franchising model really is a perfect career fit.

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Remember, there is more than one way to be an entrepreneur. Launching a startup is merely one of those ways.

Franchising is another.

It is, has been, and will continue to be a substantial source of economic growth and stability for this country. If you haven't considered making your next career move in the franchising space, now is the time to think bigger in your job search.

May the struggling economy bring out the entrepreneur in you!

Attending IFE's Online Expo? Here's How to Use This Virtual Event To Keep Your Pipeline Full In 2020

We sat down with Tom Portesy and Sheila Fischer from MFV, the parent company that puts on IFE, to talk about how attendees can get the most out of this online experience.

What is an Area Representative?

The reason why anyone would choose being an Area Representative is that they are paid a certain portion of the initial franchise fee of each new franchisee they solicit as compensation. Aside from the sales commission the area representative may get paid by the franchisor a portion of the royalties received for servicing franchisees. In some cases, franchisors will pay the area representatives a portion of the fee received from new franchisees in the reps’ territory even though the area representative may have had nothing to do with the screening or recommending that particular franchisee. However, all these and other contingencies- such as compensation for furnishing many of the pre-opening and on-going services to the franchisee- should be covered in the area representation agreement.

What Industry Should I Explore In 2020?

It’s already a month into the new year and 2020 new year resolutions aside, it is a good time to take a look at your business plans for the year, whether you’re looking to start a new business or buy a franchise. Many budding entrepreneurs still have the big question of which industry has the most potential for them to dive into looming over their heads. If you are one of them, fret not - take a look at some of these insightful trends we have discovered.