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Corner Office | By Deborah L. Cohen

Young Guns
Facing unemployment in other industries, young professionals are prime targets for the world of franchising.
Generation Y is an attractive potential operator to franchisors.

Last November, Rick Fullarton, a 26-year-old graduate of Miami University of Ohio, found himself without a job, the result of layoffs at a logistics company where he had worked in sales. Rather than pursue a similar post with another firm, Fullarton turned his back on corporate life. Now he is teaming up with his family to open a Toppers Pizza franchise.

With financial support from his father, Bob, Rick and his brother Dave are preparing to introduce Toppers to the Cincinnati market and have plans to open their first store by December. The brothers will be responsible for day-to-day operations, leaning on their dad, a former Procter & Gamble executive, for business expertise.

“I’m not a cubicle man, I’ve done that and I don’t want to do it again,” Fullarton says. “For the most part, we are going to be our own bosses and that’s very exciting.”

Would-be operators like Fullarton—young, enthusiastic, and vocal about their likes and dislikes—are becoming more common in today’s market. Against the backdrop of record-high levels of unemployment, these Gen Ys and Millennials are finding that a traditional corporate-track career is tougher than ever to pursue. Lured by the support a proven system offers, many are exploring the idea of starting their own franchises, and the quick-serve restaurant segment, especially chains skewed toward the younger set, are seeing a resulting increase in applicants.

“Interest in Toppers franchising has really started to take off, particularly in the last couple of years,” says Scott Iversen, the chain’s director of advertising and franchise development. He says that most of the company’s operators are in their late 20s and early 30s.

The same pattern is being observed by other brands catering to a younger demographic, reflecting the desire of young entrepreneurs to work in an atmosphere that represents their tastes and lifestyle choices.

“There’s certainly a greater influx of people who are younger today than there was two years ago or five years ago,” says Casey McEwen, COO for Wing Zone, an expanding Atlanta-based chain of about 100 restaurants that appeals particularly to the college crowd.

Adds Matthew Corrin, the 28-year-old CEO of Toronto-based Freshii, a growing chain offering fresh salads, sandwiches, soups, and snacks: “We get lots of franchise requests from young people who are finishing school.”

The industry itself may be helping to accelerate the trend. With prospects for economic recovery still somewhat distant, many quick serves have turned up the heat on franchise development as a way to accelerate growth without needing to front a large outlay of scarce capital. According to research firm Technomic, sales from the 400 largest restaurant franchisees grew 1.8 percent to $31.4 billion in 2008, representing about 8.6 percent of total restaurant sales in the U.S.

“That’s significant,” says David Henkes, a Technomic vice president. “That shows that this is an area of focus and interest for the restaurant industry and something that continues to be strategically important to them.”

As more baby-boomer operators reach retirement age, the trick for franchisors is to appeal to and retain younger recruits, who come to the table with a sense of open collaboration and a thirst for information not typically seen in earlier generations, says Karen Spencer, chief executive of franchise education company FranSystems Worldwide. For some companies, she says, that requires changing long-established practices.

In addition to adopting more modern, stylish marketing, a move Spencer says older brands such as Taco Bell and Dunkin’ Donuts have done well, franchisors need to bolster support tools and training to meet the needs of less-experienced operators. Industry conferences, for instance, should include special sessions that reflect the needs and culture of younger franchisees. Meanwhile, franchisors need to push into alternative forms of communication like social networking, where twenty-somethings are comfortable.

There's certainly a greater influx of people who are younger today than there was two years ago or five years ago."

“We assume they know how to be a business owner,” says Spencer of the next generation. “They want assistance, they want support. This generation has no problem admitting it.”

So just how attractive are these newcomers, many of whom are relatively new to the business world or just a few years out of college?

“They bring a clean slate and an open-mindedness to follow the system,” says Dennis Krieger, a franchise consultant and chief operating officer of EZMatchfranchising, an Internet site that matches franchise applicants with franchisors. Franchise companies “love them,” he says.

What they don’t bring is a lot of business experience or credit-worthiness. That’s why chains like Toppers require applicants to go through a thorough vetting process that includes extensive interviews and financial screening. Once approved for the system, new Toppers franchisees are also required to attend an extensive, month-long training program at the Whitewater, Wisconsin, headquarters.

“We’re very selective. We get hundreds of requests each year,” says Iversen, who looks for candidates with a track record in the industry, including those who have worked at Toppers during their college years. “They need to be someone who is a self-starter, who is really looking to grow the brand.”

Financing remains among the trickiest hurdles industry wide. Some young franchisees, like Fullarton, are able to turn to their parents for support. Others find partners or delay franchising plans until they can meet the cash requirement, which is often formidable. The average Toppers investment, for instance, is about $400,000 with about 30 percent cash up front.

Banks are increasingly selective in their requirements. That’s why chains like Toppers do their best to arm younger operators with extensive business plans, pro formas, and other tools necessary to make a strong case.

“The advantage of going with a franchise is that a franchisor oftentimes has done a great deal of homework, not only on the individual but also on the real-estate site,” says Jim Caldwell, president of First Citizens State Bank, a Whitewater, Wisconsin, bank that provided loans for Toppers’ operators. “Having another party with eyes on is always reassuring.”

Even so, deciding who to bring into the franchising fold is always a difficult call, especially in a market characterized by economic uncertainty.

“It’s a challenge, no doubt,” Iversen says. “We spend a good deal of time teaching them how to be great business people.”

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Deborah Cohen is QSR’s former Finance reporter.