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Richard Bock: Dad and grad businesses

Unemployment levels for recent college graduates remain high. Many parents of high school graduates are questioning the investment in a college education. Add to the mix the vast number of corporate veterans who either have been forced out of their jobs or have chosen to leave increasingly shaky positions.

All of these situations are feeding a trend toward more “dad and grad” businesses — a modern variation on the mom-and-pop stores of old. However, today’s small business is not your grandfather’s corner hardware store, grocery or other typical family-owned business. Instead, parents are buying and running franchises with their children.

College graduates, guided by experienced parent-mentors, often have the training to take management and sales roles in the business. High school graduates are able to learn the ropes from the bottom up while parents take responsibility for client interactions and business management. A community college can be a great resource for the high school graduate who works in the franchised business by day and takes business courses in the evening.

Finding the right fit

Many people, young and old, shy away from business ownership over concerns about the cost, the economy or the fear of failure — and with good reason.

Small businesses do fail. Typical small businesses succeed at rates of only 64 percent after two years and 50 percent after five, U.S. Census data show. And franchised business are included in this data.

However, my firm’s experience over the past 25 years demonstrates that careful selection can make a huge difference. In fact, a recent informal survey conducted by FranNet of 1,500 of our clients, with a response provided by 1,291, revealed that 91 percent of respondents were still in business after two years, 85 percent after five.

The wide range of options in franchising also makes the selection process critical. According to the SBA and the International Franchise Association, an industry trade group, there are 900,000 franchised locations in the United States, representing 3,100 franchises in 90 different industries. They generate more than $2.3 trillion in revenue each year.

A consultant can help you identify your goals, your tolerance for risk and the amount to invest. The range surprises many people. Of all franchised businesses, 30 percent cost less than $100,000 to start and 58 percent less than $250,000, according to the International Franchise Association.

Some of the industries that have continued to grow right through the economic downturn include in-home care for seniors, home repair, maintenance and modification, business to business services (temporary and permanent staffing, for example) and education. And the more traditional food and personal care businesses (like hair cutting) continue to do well.

Living the life

Clearly, not every franchise will be right for every individual. Franchise consultants who take the time to learn about your personal and professional background, financial capabilities and goals can help you find the business that will help your family be successful.

For Bill Jones and his son, Brad, the most important factor was that the franchisor reflect their strong set of business and personal values and principles. With the help of a consultant, they researched a number of options until they found those standards in Speedpro Imaging, a manufacturer of large, high resolution images used by marketing firms.

A Vietnam veteran, reservist and senior financial executive, Bill always dreamed about owning a business. When Brad, a graduate of Ohio University, became disenchanted with office politics and other strife associated with corporate life, they decided to take the plunge together. Now after three years, the Norfolk, Va.,-based business is booming, and Bill and Brad have realized their dream.

Another example is Joel Catania and his sons, Jason and Michael, who own a Great Clips hair-cutting franchise. Michael, an NYU graduate and struggling in the tough job market, attended a franchising seminar and asked Joel to consider starting the research process with him. Joel, who had taken over a jewelry manufacturing and importing business from his father, immediately saw this as an opportunity to help both of his sons obtain financial security. Jason, also an NYU graduate and a journalist who had experienced turmoil in his professional life, saw the appeal as well.

Joel was thorough in following the due diligence process recommended by his franchise consultant. He was impressed by the rave reviews of the many Great Clips franchisees he interviewed as well as the extensive training to help him and his sons launch this business. Having learned from his father the personal satisfaction and financial reward of working hard in a family-owned business, Joel is happy he can do the same for his sons.

To be sure, there are special considerations in dad-grad businesses that include:

• Succession and estate planning: Give careful consideration to how the franchise ownership will end or pass onto the next generation.

• Ownership transfer: Include language about ownership transfer in the franchise contract, and make sure the contract is reviewed by an attorney so there are no surprises.

• Family relationships: Keep the professional relationship focused on the business and try not to bring the business into your home/family life.

In today’s uncertain economic times, finding the right fit for a successful future can be a challenge, whether you are 62 with years of professional experience or 22 and just out of college, filled with ideas and enthusiasm. By joining forces, a “dad and grad” combination can be a safe and affordable launching pad for a family-owned, small business.

Richard Bock is president of FranNet of Maryland. His email address is rbock@frannet.com.