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Young entrepreneurs see big opportunities in franchising Add to ...

Hailey Nault routinely puts in 15 hours a day at her job, but has no complaints.

“I only get a few hours’ sleep a night, but this is something I love,” says the 22-year-old.

As owner of a Pita Pit franchise in Oakville, Ont., she’s among a growing trend of young entrepreneurs buying franchises instead of pursuing more traditional routes of education and employment.

Ms. Nault planned to study business at Brock University, but was recruited by TD Bank out of high school. She continued a part-time waitressing job while at the bank, and realized that her passion was in the food industry. So she started researching franchises to invest in.

“We see it as a shifting trend (young people buying franchises),” says Mississauga franchise consultant Gary Prenevost, who helps to match franchisees with franchises. “After four years of university, people are graduating with MBAs, expecting to ‘pick and choose’ [their jobs] and they’re shocked to see the limited number of options out there.”

The biggest stumbling block for young people is coming up with franchise fees, Mr. Prenevost says. The minimum is $75,000 to $100,000 for a proven franchise, then there’s the cost of setting up a store, buying inventory and having a contingency fund to survive until the business is making money.

“Banks won’t give you money for franchise fees,” says serial franchisee Ian Holol, 26. He started with a single Smoke’s Poutinery franchise in downtown Oshawa and now owns Smoke’s restaurants in Peterborough and Ajax, as well as a mobile food truck. He saved the money he earned on contract doing particle inspection at Ontario Power Generation to buy his first Smoke’s restaurant. He used profits from his first franchise to buy his second Smoke’s franchise, and from that, to buy his food truck.

Ms. Nault had saved about $50,000 and found a mentor in Rob Anderson, who owned a Pita Pit close to her home and had partnered with other franchisees on their stores.

“I contacted him, we met and talked for hours,” she says. “The passion he had for the company was unreal and I wanted in. But I had no idea how I would get $300,000 to open a store. I asked him what I had to do for him to partner with me.”

Mr. Anderson agreed to put up half the fee, if she worked at his store for a year and learned every aspect of the business. That was November 2012 and a year later, he helped Ms. Nault find the pre-existing Pita Pit she took over, and continues to mentor her.

Mr. Prenevost says that, in some cases, parents provide money to help their children buy a franchise. They may have lost their jobs due to downsizing and don’t want their children to experience the same fate, or want to help their kids find a job instead of attending university.

“Franchises have systems, processes, discipline and tools and people are learning as much about business as they might have at school, and that’s part of what’s driving the appeal,” Mr. Prevenost says. He points out that almost about half of businesses that start from scratch fail within the first few years, while about 85 per cent of the 1,300 or so people he has worked with to buy franchises are still in business five years later.

Stacey Steele, 24, and her boyfriend Gareth Rider, 27, operated their own house painting company. But when they recently moved from Calgary to Kelowna, B.C., they bought a Men In Kilts commercial and residential window washing franchise, with family members as shareholders.

“Buying into a franchise was buying into proven business model,” says Ms. Steele. “Men In Kilts has such a supportive team. They have thought out everything and the kilt is powerful branding. They have a universal call centre, so when we are out on site, we don’t have to take incoming calls and that’s a big weight off our shoulders.”

Matthew Moase, 23, was working the night shift at a packaging company and wanted to find a career better suited to family life with his wife and two young children. So the Summerside, PEI resident bought an existing HouseMaster home inspection franchise from a retiring franchisee last May.

He says he liked that HouseMaster had been established on the island for more than a decade and was a recognized name. The retiring owner agreed to provide financing, with 20 per cent down.

“I went to inspections with him, helped him fill out reports and met realtors and clients,” Mr. Moase, who had grown up helping to maintain rental units his father owned. “I knew this was a career choice for me, not a job that I’d do for three or five years then sell.”

Young entrepreneurs should expect to put in a lot of long hours initially and realize that franchises are not a get-rich-quick scheme. They have to be prepared to commit to it long term, Mr. Prenevost says.

Mr. Holol says he put in many 80-hour weeks when his first Smoke’s opened, but his is the top franchise in Canada. Having a recognized brand is only part of what’s needed to be successful, he says.

“Location is 50 per cent of it and the other 50 per cent is marketing yourself,” he says. His Oshawa franchise, for instance, is in downtown close to a bar, a major sports and concert venue, and in the midst of half dozen buildings that belong to the University of Ontario Institute of Technology.

“The hard part was starting out,” Ms. Steele says, of getting Men In Kilts recognized in Kelowna. “We put on our kilts and worked at being visible in the community. There was a lot of door knocking and cold-calling.”

“The most challenging thing was coming from Rob’s Pita Pit store, one of the top in Canada, to this store where the brand was not as strong,” Ms. Nault says. “I have the power to make the brand stronger. If it succeeds, it’s because I did it. That’s more exciting than anything.”

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