Millennials are proving they’re Generation Entrepreneur, preferring startups over the 9-to-5 and wanting to be the next Mark Zuckerberg. And franchises are increasingly the business venture of choice for members of Generation Y.
So if you’re thinking about what to do when you finish college or if you’re struggling to find a job, then read on. Maybe you’d love to start your own business, but the risk factors are stopping you from taking the plunge? Franchising can be the ideal business model for anyone considering setting up in business, and investing in a franchise in your twenties can be the perfect choice because of the established brand and support network.
Ten years ago it would have been tough to find somebody in the franchising industry who thought people in their twenties or early thirties were prime franchisee candidates. For the most part, franchise ownership has been reserved for a small demographic of high-net-worth individuals or executives from the corporate world who wanted to go out on their own. But this has totally started to change.
Franchises, especially lower-cost franchises and tech-based systems, have “discovered” Millennials. Despite a media-fed stereotype that Millennials are self-absorbed, avoid hard work and expect praise without accomplishment, franchisors who have worked with them have found many to be energetic, adaptable, smart and hardworking.
HOW TO DEAL WITH A LACK OF EXPERIENCE
While the thought of owning your own business is alluring, the reality for a millennial can be daunting. Faced with the desire to be their own boss, but challenged with lack of experience, many millennials should consider franchising as an ideal solution.
Franchise owners are provided rights to market a brand’s goods or services within a certain territory or location, in exchange for a fee and royalties for ongoing support. The royalty fee also works to keep the company owner (franchisor) invested in the continued success of each franchise location.
Franchises provide the opportunity for business ownership and a level of independence alongside an established company with a proven record of success, and oftentimes a well-recognised brand name. Individuals will be more likely to see a higher probability of success through franchising than starting an independent business for a variety of factors, including:
- Shorter ramp up/opening period
- Initial training and ongoing support
- Lower costs through group purchasing
- Use of an established business model
- Marketing and advertising support and tools
- A network of peers to rely on for advice, mentoring and best practices
- Assistance with securing funding
The franchise model allows individuals to go into business for themselves, but not by themselves. In addition, many entrepreneurs find that joining a trusted and recognized network also provides their consumers with the comfort of purchasing items or services they are familiar with and working with names they know and trust.
HOW TO OVERCOME A LACK OF FINANCE
A lack of startup cash is a real problem for young people when setting out on their franchise journey. Your bank should be your first port of call but here are some terrific, alternative sources of funding for the younger franchisee.
GOVERNMENT GRANTS
It is an award of funds from the government that does not need to be repaid, does not accrue interest, and has strict guidelines for application.
National Youth Development Agency (NYDA)
While it is moving away from grants for youth and going toward mentorship and development programmes, grants are available for youth entrepreneurs.
Funding: Grant programmes start from R1000 to R100 000, while thousands more youth will access the non-financial business support services. Young people interested in accessing the grant programme will have to commit to participate in the NYDA mentorship and voucher programme for a minimum of 2 years.
Website: nyda.gov.za/grants
CROWDFUNDING
With banks reluctant to help, entrepreneurs are turning to alternative forms of finance and crowdfunding is one of the big hits of the emerging new financial sector. Businesses frustrated by a lack of support from traditional banks have been turning to the wisdom of the crowd for investment instead. There are different forms of crowdfunding: equity, rewards and charitable. Here are some that a millennial could consider.
Fundfind
Steve Larter founded the platform with the intention of focusing on creative projects. But the site can now be used for anything, from charities to stating a small business or creating a new product.
Rate: There is a fee on any funds that are raised, which is 5% of the money you raise on all-or-nothing projects and 9% of the money you raise on keep-what-you-raise projects. There is also a 6% fee that we charge to cover the transaction fees charged by our payment gateway.
Website: fundfind.co.za
StartMe
Funds projects from South Africa’s most talented trendsetters. As long as you have a valid bank account, you can create your online project and start explaining the details of your proposal.
Rate: StartMe is free to join. There is a fee on any money that is raised, which is 5% of the money you raise if you meet your goal or 9% if you do not meet your goal.
Website: startme.co.za
Thundafund
Is a crowd funding platform that specifically focuses on helping start-ups raise capital. South Africa’s leading online Crowd funding Cafe and marketplace for creatives and innovators.
Rate: 5% for certified NGOs and 7% for individuals and organisations
Website: thundafund.com
Jumpstarter
A crowd funding portal for South Africans. Linking people with good business ideas to the people who want to see those ideas succeed.
Rate: It applies a 3.5% fee to the funds collected.
Website: jumpstarter.co.za
Backabuddy
An online fundraising platform that helps individuals raise funds for causes they are passionate about.
Rate: It varies from 3 to 5%.
Website: backabuddy.co.za
You may also want to check out international crowdfunding platforms open to South African startups:
Kickstarter
Having funded over 77,000 creative projects since 2009 Kickstarter are a big globalplayer in crowdfunding.
Rate: 5% commission
Website: kickstarter.com
Indiegogo
Indiegogo are another big player in international crowdfunding.
Rate: 9% but they refund you 5% if your project goes ahead.
Website: indiegogo.com