Franchise options fewer for entrepreneurs

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Rob Taylor owns the Chick-fil-A at 7990 N. Academy Blvd. He bought into the franchise for $5,000 about 21 years ago. Entrepreneurs today are finding it harder to become franchise owners.

When Rob Taylor borrowed $5,000 to buy a Chick-fil-A franchise 21 years ago, he did it because he wanted to be his own boss.

Franchising holds the same allure today and continues to draw entrepreneurs. Interest in franchise ownership historically rises during economic downturns and this one is no different.

But buying one isn’t as easy as it used to be.

Jerry Cantrell, a Denver-based franchising coach who works with several Colorado Springs business owners, said he’s never been busier. People come to him seeking advice about how to pursue franchise ownership.

While interest is as high as it’s ever been, the environment is nowhere near as friendly to would-be franchisees today as it has been in previous economic downturns.

“Since 2008, it’s been a little bit different,” said Kevin Hein, a franchising attorney with Faegre & Benson who works with businesses all along the Front Range.

It used to be that people who lost their jobs with corporations received big severance packages. They had healthy 401K retirement plans they could borrow from and they usually had some liquidity in their homes that they could borrow on to start a business.

Those days are history, Hein said. Today, people don’t get severance packages. They’re upside down on their homes and their 401Ks aren’t worth what they once were.

On top of all that, franchisors are more particular about who they sell to.

LearningRX, is a Colorado Springs-based business that has franchised about 70 locations around the country. The company offers brain training, which teaches people how to manage conditions like Attention Deficit Disorder and autism.

The company is very particular about who it selects to own franchises, said vice president of franchising for LearningRX.

“There has to be an empathy piece there,” she said.

Because franchisees will deal with parents and families who need help, they have to be empathetic and they have to be passionate about the service LearningRX offers. But that’s not enough. They have to have business savvy, marketing and networking abilities — drive. That drive is the most important element.

Mitchell said LearningRX has had to turn away potential franchisees who were incredibly passionate about the product because they worried the prospect wouldn’t be able to successfully drive the business.

Aside from businesses needing a good match, some require bigger commitments, Hein said. Some aren’t interested in franchisees who want to own a single store. They want someone who will invest hundreds of thousands of dollars into a cluster of regional stores.

“The pool of available franchisees has potentially shrunken forever,” Hein said. “The people who used to qualify, may never qualify again.”

Charlie Golding, who owns eight McDonalds restaurants in Colorado Springs and Woodland Park and who used to work in franchise development at the corporate level, said he believes fewer young entrepreneurs are rising through the ranks to buy their own franchises today.

Even with all of that, though, there are still new franchise owners emerging, stepping up and buying into their own small businesses.

Not all franchises are McDonald’s and Quizno’s and Applebee’s.

Hein works with a lot of franchisees who operate small home-based businesses selling outdoor lighting and dog training. They’re higher-end services and products where the franchisee stands to make a good profit on just a few sales, but where the items come at a higher cost and may be harder to sell during tough times.

A small franchise, something without a lot of overhead, appealed to Katie and Ryan Linell. They both worked for corporations in Chicago. Katie worked in public relations and Ryan was a sales account executive for a publisher.

They both came from families where their parents were self-employed.

“The entire time I was working, I knew — ‘this isn’t what I’m supposed to be doing,’” Katie said.

Her father is a franchising coach in Castle Rock, Colo. and Katie grew up with her dad at the helm of dozens of different kinds of businesses.

She knew she wanted to own a business, but didn’t really know what kind. She shopped around for franchises before she found ShelfGenie. The company designs, builds and sells quality retrofitting glide-out shelving that helps people update their kitchens without remodeling.

The Colorado Springs market was available when Katie found ShelfGenie and the opportunity worked out perfectly.

Franchising is really the only way the Linells could have started a business like this one, Katie said.

“I don’t know how to make shelving,” she said. “I’m not a woodworker. You have all the resources. They make all the appointments and they have the expertise. It made the ramp up extremely fast.”

The web site was up and running right away and they had a home show the week they moved to town.

Today, they’ve been in business about a year and it’s been a success. They’re making a living and they’re working for themselves.

The working-for-yourself element doesn’t just draw people like the Linells.

Even big franchises like McDonald’s have the full thrust of the American dream behind them.

Golding, who owns eight local McDonald’s restaurants, started working at McDonald’s when he was 16. It was his first job and he just wanted gas money and chance to meet girls. He met his wife there. After some time in McDonald’s corporate offices, Golding decided he wanted to own his own business.

He and his wife started with one franchise in California and sold two there a few years ago to move to Colorado and own eight.

Golding said that most McDonald’s franchisees are former employees. Even the president and CEO were “crew members” when they were teenagers.

“That’s how you get to know this business,” Golding said.

Some franchisees do buy into McDonald’s as entrepreneurs and former business owners who have never fried potatoes under the golden arches, he said.

“I could put a sign out that says ‘Charlie’s Burgers,’ but I don’t know how many people would stop in,” Golding said. “You put the arches out there and people know what they’re going to get.”

That’s part of what Chick-fil-A owner Taylor bought into, though he didn’t know it at the time. Chick-fil-A was new and the stores were only in malls at the time.

Taylor had never heard of Chick-fil-A before he learned of the franchising opportunity. He heard it was a fast food restaurant and balked. He wanted nothing to do with fast food after a career in full-service and fine dining. But he tried the food and drank the fresh-squeezed lemonade and decided it was a product he could get behind, especially with Sundays off.

“The thing about owning your own business is you are your own boss and you’re in control of your time,” Taylor said.

But you will work harder than you’ve ever worked in your life.”