Franchising through the Ages – A Generational Perspective

Times are changing and things are moving quicker than ever before, never has that been more evident than in the case of business ownership and entrepreneurialism.

I don’t know about you, but I get confused about generational labels being used and what they actually mean, as if these labels weren’t confusing enough to keep up with, the exact timeline of generations isn’t that easy to decipher either. While there is some consensus among social scientists about the general periods of time associated with each generation, there is no clear-cut line defining when one generation ends, and another begins.

Each generation makes comments about the other, often because we may not know what each of them mean and why each behave in the manner they do, how many times have you heard someone say “Back in my day” or “the Kids these days are different” or some variant of commentary on another generation, either way every generation has an opinion on everything, influenced by the period they grew up in. I’m sure the younger generations say the same thing about the older generations, I know my Kids (Generation Z) do.

It’s important for us to understand what these generations mean, what influences them and from a franchise perspective what does it all mean?

A generation is a group of people born at roughly the same time. They were usually grouped by a 20-year time interval but the time frame for the last four generations has shortened to approximately 14 years, here’s a quick summary of the current generations:

· The Baby Boomer Generation: (1946 – 1964) Ambitious, goal-oriented, and competitive, Focused and believe in more hours at work, sometimes careless about wealth, Resourceful and team players and can be Bureaucratic.

· Generation X: (1965 – 1979) Work hard, believe in work-life balance, Independent-minded, Flexible, and direct, Self-reliant, Thinkers and embrace feedback, in debt and can be a little Cynical.

· Generation Y: (1980 – 1994) Often referred to as Millennials, they are Socially driven, ethnically diverse, Tech-driven, and curious, Educated, and multi-career based, financially conscious and therefore stable, less focussed interpersonal skills, less religious.

· Generation Z: (1995 – 2009) Tech-savvy and ‘always on ‘, Reduced attention span, Indoor generation, ethnically diverse, set for online social interactions, less religious, like personalised learning and like Gen Y are less focussed on interpersonal skills.

· Generation Alpha: Born After 2010 – Very similar to Gen Z but hard to characterise particularly for business because of their age. But are also Tech-savvy and ‘always on‘, Will need 21st century skills in the classroom and are ready to embrace metaverse devices such as VR and AR

It is important to note that the characteristics of these groups are not entirely universal. There is a great deal of diversity within each generation, and individuals within each generation may not share all of the characteristics that are associated with their ‘group’.

Additionally, the boundaries between generations are not always clear. For example, some people born in the early 1990s may identify more with Generation Z, while others may identify more with millennials.

Regardless of what group classification, franchisors need to address these differences when targeting both types of customers, they interact with, 1. The customer that directly pays for the goods or services and 2. The franchisee that they grant the franchise rights to.

If you’re a potential franchisee looking at a brand, you need to identify if the franchise system has a strategy for servicing the different groups or are they clear with who their customer is and what is important to them and do they communicate effectively with those target groups. One of the brands we launched into franchising, Milky Lane is very clear about who their customer is, it’s an 18-35 year old (Gen Y & Gen X) and consequently over 90% of their franchisees fit into this demographic as the brand resonates with them.

When it comes to business ownership it is just as important to understand your offering to those markets and who your ideal avatar as a franchisee may be.

Previous studies have shown that the rate of self-employment for younger individuals is lower than older individuals and businesses created by persons less than 35 years old don’t perform as well as businesses created by entrepreneurs between the ages of 45 to 54 years old.

There has been a lot of research on the impact that age has on success in business and entrepreneurialism, but it has proven to be inconclusive. There is little relationship between age category and franchisee satisfaction suggesting younger entrepreneurs can be equally as successful in franchising.

One of the biggest obstacles younger entrepreneurs’ faces is securing financing for starting a business, particularly in franchising as a franchise establishment cost can be higher due to the initial fees and potentially higher fit out requirements for established brands. So, if a franchisor is wanting to attract a younger franchisee, they need to have a low-cost model or innovative funding methods to get the right people into their system. We have seen this program work very successfully with Baker’s Delight for many years with their ‘Manage to Own program’ where they take store managers and create a succession plan for them to acquire a business over a period of time, creating business opportunities for employees that show initiative and drive where they may not have the funds to open a business on their own.

Historically we have seen a significant portion the franchising sector come from the Gen X (51 to 60-year-old group), implying franchising has been more targeted to an older entrepreneur, often because they have accumulated enough capital to fund a business and because they want to be their own boss and do things on their own terms and business ownership offers this type of freedom and a franchise offers a greater success rate than independent businesses.

According to Forbes magazine, 72 percent of millennials would like to be their own boss. Seventy-four percent want flexible work schedules and 88 percent want “work-life integration,” a switch from work-life balance, as the line between life and work has irreversibly blurred. However, when it comes to entrepreneurial endeavours, franchising is often an overlooked opportunity among this group usually because of the costs associated with franchising and the potential of being tied down for set period of time.

2016 BNP Paribas Global Entrepreneur Report which reported that millennials were starting businesses at a younger age than previous generations. Baby Boomers were reported to have launched their first business venture aged 35 years old on average, with Millennials starting their first business around age 27. What can be seen from this, is that the Millennial generation is more eager to launch their own enterprises – and possibly more willing to take risks when doing so?

Regardless of which generational group you fit into there’s a business for everyone that wants to enter business, Not everyone can or should become a business owner. Statistically, around 16% of the world’s eligible working population get into business ownership, and they do this for several reasons: to be their own boss, to take control of their life and future, the pride of being a business owner and hopefully to be more financial and successful than remaining in paid employment. It is estimated that business owners generate an income that is 30% higher than had they stayed in employment.

There are three broad classifications I’d like to share with you and they cross generational, The Craftsman, The Mountain Climber and The Freedom fighter.

Three Types of Business Owners

While there is no single behavioural style or motivator that makes a successful business owner, there are similarities shared by the most successful. John Warrillow, bestselling author of Built to Sell and creator of The Value Builder System, has developed three contrasting profiles that provide a simple model for classifying the three most common business owner types.

1. The craftsman is a highly skilled person who creates a business because they know how to create a superior product. The custom motorcycle builder, the donut maker, the smartphone app developer. Their energy is primarily focused on the creation of the product that they provide and less on running and growing a business. Michael Gerber refers to these types of business owners as technicians in his book The E-Myth.

2. The mountain climber sees the development of their business as a series of hurdles to cross and a series of peaks to ascend. While they possess a strong drive to succeed, they never find true satisfaction in their work. Each conquered goal is followed by an even loftier one. Once they have created a successful company, they are not content to just run it. Instead, they conquered that challenge — now, on to the next one.

I want to comment on the new generation of business owners that I have encountered in the past three years. There is a huge increase in the number of millennial business owners. For instance, out of over 40 business owners I coach at the moment, more than 20 of them are in the late 20s and early 30s. The reason why I mention this is that nearly all of them are ‘mountain climbers’. This next generation of business owners are very different to the older and more experienced business owners I work with, who tend to be more like ‘craftsmen’ and tend to have had their businesses for much longer periods of time (over 15 years). This is compared to the millennial business owners I work with, who want to build, flip, and be out within five years so they can move to the next project.

3. The freedom fighter strives for independence. They have been an employee in other businesses and decided to leave and start their own endeavour. There is no one-size-fits-all freedom fighter, but you might be one if you’ve ever been a part of a system and thought, ‘I can do this better’. It’s the freedom fighter’s constructive attitude that makes them so unique and makes them perfect for a franchise system.

Whereas craftsmen and mountain climbers will have a strong desire to develop their own concept for a new business, freedom fighters are great fits for owning a franchise system; especially one that combines a framework for success with a lot of flexibility.

The Freedom Fighter in the Franchise System

The freedom fighter is typically utilitarian and individualistic. They often feel that their managers don’t know what they’re doing and that they could do better. The following statements are reflective of the thoughts of a freedom fighter.

They’ve often been sceptical about the decisions that the leaders of companies they worked for have made.

They’ve felt frustrated that they don’t have enough control over their career and their life.

They may have believed that if they were in charge, they would approach things differently — and have a better outcome.

They feel like their skills and their knowledge are often under-utilised by the businesses that they work for.

They’ve had the thought in the back of their mind that they’d like to start their own business someday, so that they could benefit from running things their way.

They’ve had the desire to have a greater impact on the world.

Success in Freedom

There are two types of franchise systems out there. One type is highly controlling; everything that they do must follow a precise, step-by-step process. For example, if they run a food-related franchise system, they cannot conceptualise new products or deserts nor can they make variations on the set products. The store will look identical to any other franchise operators. They need to operate within a very strict framework that allows zero creativity. This type of system is not too appealing to a freedom fighter.

What’s so great about the freedom fighter is that they can operate within a pre-existing system and make it fit their personal vision. They don’t necessarily seek freedom from a system or guidelines but freedom to work flexibly.

We’re all different regardless of when we were born, certainly the attitudes of different generations impact on the vocation we pursue but the beauty of franchising is that there is a business for every generation and every motivation, you’ve just got to know what motivates you and ensure the brand you choose is aligned to you, your values and objectives.