Five Traits of Successful Franchise Owners
Article by Mark Schnurman
Here’s What Sets the Top Franchise Owners Apart From the Rest
Many people think about starting a business but most stop because they do not know where to begin. They may not have a great idea or a plan for getting started. Indeed, if you have not launched a business in the past or have been in the corporate world for a long time, it is perfectly natural that you would not have a clear path to business ownership.
I am a strong advocate for entrepreneurship. Being the owner of several different businesses has provided me the opportunity for professional and financial success. Perhaps more importantly, business ownership provides autonomy and freedom I coveted — but never had — as an employee. The result of being a business owner is a level of happiness magnitudes higher than what I felt working for others. Indeed, I never knew how unhappy I was in corporate life — and the spillover that it had into my personal life — until I realized how happy I can be.
The profound truth of business ownership is it can be life changing and help you experience the world in a much more constructive way.
And business ownership is not for everyone. While franchising offers myriad opportunities in a variety of different sectors, there are some keys to successful business ownership. So what makes a good franchise owner? From my experience, the following traits set the best franchise business owners apart from the rest.
What Makes a Good Franchise Owner?
Internal Sense of Responsibility
This speaks to the need of a business owner to take personal responsibility for every aspect of a business’s success. In the corporate world, there are people responsible for all aspects of the business, but when you are the boss the buck stops with you. The most successful business owners have an internal locus of control — meaning they believe they have the ability to impact outcomes. They do not blame others for results!
Achievement Drive/Determination
Entrepreneurs have a strong drive to accomplish their tasks, objectives and goals. They strive for achievement and growth and maintain high standards for themselves and others. They are intrinsically motivated. As a business owner, you are the only person pushing you forward.
Self Confidence
Successful people in general — and entrepreneurs specifically — believe in themselves. They have a high sense of self-worth and confidence. They believe if something can be accomplished, they can do it. This self-confidence translates into strong execution. Confidence is the fuel that drives people through the inevitable obstacles of life.
Decision-Making Ability
When you are the boss, you are the one responsible for making the decisions. Often, business owners need to make decisions without all the facts. This means that they need to rely on their acumen and judgment. Speed to a decision is also important in our ever-changing world. Procrastinating or avoiding decisions only limits your ability to succeed.
Communication Skills
The ability to communicate effectively with employees, clients, and peers is paramount to success. Strong communication skills translate into leadership, management, sales, and customer service — all critical aspects of business success. Regardless of your level of involvement in your business, you must effectively communicate the vision and strategy and drive execution.
As you can see, many of the same traits that enable success in the corporate world translate into business ownership. The good thing is if you have the traits of a successful business owner, there is probably a franchise that will hit the mark for you!
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Why Home Service Brands Are Hot Commodities
Scott Abbott started Five Star Painting in 2004, when he was 18, and sold it in 2015 to Neighborly, when it became the eighth brand under the home service franchisor’s umbrella. Today, Neighborly is owned by mega-private equity firm KKR and has 29 home service brands and more than 4,800 franchises in nine countries.
And Abbott himself, now 46, launched in November his own portfolio company, Five Star Franchising, after attracting Princeton Equity Group as an investor and purchasing Joe Homebuyer, Gotcha Covered and Bio-One. Five Star Franchising’s brands include nearly 300 franchise owners and 350 territories across the U.S. and Canada.
Yep, investors are hot for the once-lonely home service sector. (See sidebar for six recent deals that illustrate the trend.)
Reason No. 1: “Neighborly kind of pioneered this idea of rolling out brands in a platform. They didn’t get nearly the valuations 15 years ago, 20 years ago,” Abbott said. In July 2021, “Neighborly sold to KKR at a very high valuation. They’re showing the market, private equity is giving them a premium. There are only so many home services companies out there to buy.”
Reason No. 2: “In general, people who are owning homes today are a lot less capable at fixing those homes than they were 20 years ago. It’s a generational thing, and millennials would rather outsource it all,” he said.
Reason No. 3: A lot of founders think “it’s a good time to sell,” he said, in part because the pandemic showed how unexpected risks can torpedo their plans. “If I have 98 percent of my wealth tied up in one business, I’m exposed to things outside of my control. It could wipe out 10, 15 years of work. I’m giving owners a way to take some chips off the table.”
He wouldn’t name the sales price for his own company, saying only, “Since 2015, and now six years later, the multiples are going up,” from about three times EBITDA or cash flow back then. “The market will pay 10 times, sometimes eight, sometimes 12, sometimes 15” today, he said.
And does he aspire to create the next Neighborly? “Um, my eyes are probably bigger than my stomach. I would never put myself in that category today. They’re an amazing company with an amazing leadership team,” Abbott said. “I don’t look at it as a race. I look at it as an aspiration, someday becoming as good as they are.”
A buyer’s and a seller’s view
“Here we go again. I feel very lucky. There’s lots of action to be had,” said Paul Flick, CEO of Premium Service Brands, which added House Doctors and Grout Medic to the family in fall 2021, and had two more acquisitions scheduled to close in the fourth quarter.
Many deals these days have valuations “above our pay grade,” Flick said. “Some of them are 10, 12, 14 times EBITDA. Some of the ones we did recently were eight to 10. I think the average is probably on the 12 to 14 range.”
That’s much higher than before. “Back then, geez, we were picking them up for two or three times EBITDA, and that was recently, that was three, four, five years ago. Private equity has definitely changed our industry for sure.”
He’s learned some lessons since starting his acquisition surge. “Once we’ve done a few, you learn from your mistakes and want to make sure you turn over all the rocks to make sure you’re getting what you’re paying for, No. 1,” Flick said.
And No. 2? “Whether you’re doing a small deal or a large deal it’s the same amount of time and effort, and acquiring something that has a little more volume impacts our company that much more right out of the gates.”
Kathleen Kuhn, former CEO of HouseMaster, decided to sell to Neighborly in July 2020, after fielding numerous offers from private equity firms. “There was so much interest. Actually, Neighborly was one of many. Certainly, they were one of the higher bidders, so the price was right,” she said.
“I don’t know if heartwarming is the term, but it’s nice to see that the equity world sees the value in A, the franchise model, and B, the home service model. I’ve never seen in the last three years so much interest in the space, and it’s exciting.”
Kuhn stayed on as an executive with Neighborly for about six months, then left to help raise a Series C round of investment for MooveGuru, where she is president. MooveGuru is launching a new franchise called YourHomeHub, which is a technology platform that helps consumers manage their homes from move-in through everyday living until they sell.
“They’re in the real estate vendor space and they’re going to franchise, and it’s technology and it’s very entrepreneurial,” she said about YourHomeHub, which has 13 territories sold. “It really checked all the boxes for me.”
Her advice for potential sellers: “I think somebody who’s ready to sell has to be ready to move on,” she said. “They have to be ready to let go, and that’s really the biggest challenge.”
The nitty-gritty of home services
Scott Sutton is chief growth officer for Threshold Brands, a platform company created in April 2021 by private equity firm The Riverside Company to acquire and operate home service franchises. It has seven brands under the umbrella, and counting.
“We would expect to have many more brands inside the portfolio. We have a ways to go. We’ve had a lot of interest inside of our brands, specifically our franchisees, in not just becoming multi-unit and -brand franchisees, but becoming multi-unit cross-brand franchisees,” Sutton said.
Riverside is not new to the sector; it bought and sold Neighborly, formerly called the Dwyer Group, on two different occasions. Sutton is a veteran in franchise M&A as well, driving acquisitions for Safeguard, a business-to-business franchise. But his new gig is different.
“When you do a lot of acquisition work, you work on one side of the table to get through the deal components, to get through the diligence, and then you work to transition that business to the group that’s going to be leading the group going forward,” he said. “Well guess what, now I’m part of that group that will move it forward!”
There’s another unexpected side of home service franchising, which he’s learning at brands like Pestmaster, FlyFoe and Threshold’s most recent acquisition, Sir Grout.
Reached during a conference in Las Vegas for pest services, he said he had a new vantage point when visiting the restroom. “Now I’m staring at the grout. Oh my gosh, this grout is disgusting!” he thought, illustrating on the micro level why the home service space is exploding.
Standout home services deals in 2021
#1 Home Franchise Concepts, a JM Family Enterprises subsidiary, added in September Two Maids & A Mop to its portfolio, which also includes Budget Blinds, Tailored Living, Concrete Craft, AdvantaClean, Kitchen Tune-Up and Bath Tune-Up.
#2 MidOcean Partners and its Lynx Franchising platform in September invested in Outdoor Living Brands, adding Archadeck, Outdoor Lighting Perspectives and Conserva Irrigation to the family.
#3 Threshold Brands, formed in April as a platform for home services franchises and backed by The Riverside Company, bought Sir Grout in September, adding it to MaidPro, FlyFoe, Men In Kilts, Pestmaster Services, USA Insulation and Plumbing Heating Paramedics.
#4 Stellar Brands debuted in April as the umbrella company for Restoration 1, Bluefrog Plumbing + Drain and future acquisitions, and bought The Driveway Co. MPK Equity Partners is the investor.
#5 Premium Service Brands attracted in April Susquehanna Private Capital as an investor, then bought Grout Medic and House Doctors, among others. The firm operates seven home services brands: 360° Painting, Maid Right, ProLift Garage Doors, Handyman Pro, Kitchen Wise, Rubbish Works and Renew Crew.
#6 Authority Brands in March bought DoodyCalls, its eighth brand addition since October 2018 and the company’s tenth brand in its home service portfolio. Others include: The Cleaning Authority, America’s Swimming Pool Company, Mosquito Squad, Monster Tree Service and STOP Restoration.
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Great Resignation Underway: Record Percentage of Aspiring Business Owners are Leaving Full-Time Jobs
Over two-thirds (66.2%) of entrepreneurs who agree or strongly agree that “now is a good time to start a business” in October 2021, down from September’s high at 73.4%. Aspiring owners who anticipate starting their businesses in the “next month” dropped to 16.2% in October 2021, in contrast to the record 36.1% seen in the prior month.
But one of the most remarkable findings was that 58.6% of the respondents plan to leave full-time jobs. This is the highest percentage since 59.1% in January 2020.
The most recent Startup Sentiment Index™ survey was conducted October 21-27, 2021, as US financial markets recovered to new highs, concerns about the Delta Covid faded, Congress stood at impasse over multi-trillion-dollar legislation, and key elections were just days away.
Additional highlights:
- Future business conditions: 32.5% of respondents believe that in three months, business conditions will be “better” or “much better” than now, down from 46.5% in September. About 50.6% see conditions “about the same” in three months.
- Access to funding: The percentage of entrepreneurs concerned about finding adequate funding increased, with those seeing funding “harder or much harder” to obtain at 33.8%, up from 23.8% in September.
- Demographics: In October, 58.6% of respondents were currently employed full-time, and 20% were current business owners. Gen-X (49.4%) and Gen-Y (28.6%) are the largest age cohorts, while “Baby Boomers” follow at 20.1% of respondents.
Download a copy of the October 2021 SSI report here. See excerpts from prior SSI™ surveys and subscribe to receive the Small Business Startup Sentiment Index™ monthly report when it is released.
The Small Business Startup Sentiment Index™ is based on a monthly survey of individuals who have recently inquired about businesses or franchises for sale on the digital assets of FranchiseVentures.
FranchiseVentures is the leading demand– and lead-generation platform for potential franchisees to thousands of growing franchise systems in the United States and Canada. Its franchise lead generation brands include Franchise.com, Franchise Solutions, Franchise Gator, Franchise Opportunities, Franchise For Sale, SmallBusinessStartup.com and BusinessBroker.net, and together they provide the largest aggregation of prospective franchise buyers in the U.S.
5 Questions to ask yourself before buying a franchise
Here’s how to know if a franchise business is right for you
For some, owning a business has been a life-long dream. Maybe business ownership was down the road, but the timing never seemed right. For many people young in their careers, climbing the corporate ladder, gaining management experience and building their 401k are the priorities. On the personal side, starting a family, buying a home, raising children are often obstacles to business ownership.
It happens all the time. One day it all changes and the “dream job” is no longer consistent and neither is the pay. Job changes and pay changes become a constant cycle. Business travel and after-hour meetings become the norm not the exception. Spending time with family and friends come off the priority list. And then the wake-up call comes in… and the questions are asked: “Where did the last 20 years go? Who has been in control of my career? What important events did I miss? What happened to that dream of freedom and flexibility, control over my own destiny and being my own boss?” It all got pushed aside because the urgency of life got in the way.
That’s a heavy burden to carry, one full of frustration, sadness and disappointment.
So what’s the solution? How does one change the relentless spin of life? The answer is quite simple, but making the decision to change is not. Follow your dreams!
More than thirty years ago, that was part of my story. I was chasing my corporate plans while letting my entrepreneurial dreams fade away. An event happened in my life that caused me to change my priorities and change my career. I decided to move from being controlled to being in control. Through franchise ownership, I became the boss instead of being bossed around and took charge of my financial future rather than having my financial future controlled by someone else. Was the decision easy? Absolutely not. Was the decision worth it? Absolutely yes! What’s your dream? What’s your passion? Do you want to be the boss or the employee?
When that internal conversation happens, you need to ask yourself if it’s time to follow your dreams.
Being an employee can be easy. You follow the direction of your boss, do your job, and get paid for your work. Seems simple enough until you discover the independent streak in your personality is stronger than you think. You begin to question your boss or your boss’s boss. You’re told to do things you don’t agree with. You discover the promotions, raises and bonuses go to people who, in your opinion, don’t deserve them. You’ve reached your earning potential. Negative changes beyond your control are being made to your benefits and retirement plans. You’re asked to make sacrifices that hurt your family. You need to play politics to stay relevant and survive. You’re required to make compromises you don’t agree with. Your boss is making your life difficult. You see no future in your current position. You start looking for other career options. You keep thinking to yourself, “If I were the boss, I would treat people differently, I would be in control of my financial future, and I would have freedom and flexibility on my terms.” When that internal conversation happens, you need to ask yourself if it’s time to follow your dreams and discover how you can control your own destiny.
There are 5 essential questions you can ask yourself to determine if the time is right for you to change your dream into a reality. Is franchise ownership for you? Read on, and see for yourself.
QUESTION #1: Am I willing to take a risk into franchise ownership?
Risk is related to fear, and fear can be one of the strongest emotions humans feel. It either keeps you from doing great things or motivates you to do great things. Buying a franchise is a risk. Here are some risk factors.
- You could lose your financial investment.
- You could fail.
- The future is uncertain.
- You could make a bad choice.
- It could negatively impact your family.
- The economy could go bad.
- Employees may be difficult to find.
The reality is, there is risk in doing anything. Is it scary to become a business owner? Absolutely; but successful people embrace change and identify the risks. Once they recognize the risk is overshadowed by fear, they can begin to work through it. Everyone has fears, they begin in childhood. We are taught to be careful and cautious. As we age, we discover the strongest fears we had as children were able to be overcome. We dealt with the fear and moved on. Remember riding a bike for the first time? Feel the fear and do it anyway.
QUESTION #2: What’s driving me to own a franchise business?
Discovering your true motivations for wanting to own a business is critical. Ask yourself these questions:
- What’s driving me, pain or gain?
- Do I want to move away from something painful?
- Is my career in transition?
- Am I tired of the constant career uncertainties?
- Am I frustrated with my earning potential?
- Is the excitement of doing something I’ve always dreamed of motivating me?
- Do I want to control my own destiny?
- Do I want to have more freedom and flexibility in my life?
- Do I want greater financial control and security?
If your answers to these questions point you in the direction of making a career change, then business ownership should be a consideration. Having a clear understanding of the “why” will ultimately help define the “what.”
QUESTION #3: Can I afford a franchise?
Buying a franchise can be expensive. A recipe for business failure is not knowing the true start-up costs, ongoing expenses, and profitability. Proper financial due diligence is critical. Understanding the business costs and personal financial requirements during the start-up phase is essential to short-term and long-term success. The good news in franchising is that with the proper guidance, you can learn about and calculate the business’s start-up and ongoing expenses. You will also be able to develop proformas to determine operational break-even and profitability. Gathering this information will also help you evaluate the funds needed to sustain your lifestyle while growing your business.
QUESTION #4: Do I have the right personality for franchise ownership?
Personality plays an important role in franchise ownership. Since the owner sets the tone for the business, their personality will drive the environment and atmosphere. People do business with people they like. Employees work for people they like. An owner that does not like to work with people will have a difficult time attracting strong customer service-oriented people. If, on the other hand, you are a people person, strong motivator, and leader, employees will be happy and customers will be satisfied. Do you have the right personality for franchise ownership? Ask yourself these questions:
- Do I have the ability to lead people?
- Do I enjoy and work well with people?
- Am I willing to learn, take direction and follow a plan?
- Am I a good listener and problem solver?
- Do I have a strong work ethic?
If your answers to these questions are yes, business ownership for you should be a strong consideration.
QUESTION #5: When is the best time to invest in a franchise?
When is the best time for you to become a franchise business owner? Only you can answer that question. Are you early in your career or have you been on the corporate treadmill for years? You may be thinking, “someday when I’ve saved enough money and my most expensive years are behind me, then the timing will be right.” Or you may be one of the many people I meet who say, “now that I’m getting closer to retirement, I should have taken the leap sooner.” As “they” say, “timing is everything.”
Entering into business ownership is a very personal decision. However, there are a few considerations to make. People generally make big changes when a life event occurs. It could be an overwhelming sensation you feel that being your own boss is the only thing that will make you happy in your career. Or it could be a career change event (termination, downsizing, rightsizing) that causes to you pause and consider, “are there other options I should evaluate before I make a decision to get another job?”
Maybe you’re in a position where the job options are not plentiful, pay is not adequate and rejections are discouraging. Some people settle for an employment option because it’s the path that seems the most safe and secure… until that new job is a disappointment or goes away. And the cycle continues, job after job.
When will the timing be right for you? If you’re reading this article, now may be the best time. Chances are good you should give franchise business ownership serious consideration. Seeking the expertise of an experienced franchise consultant will help you make an informed decision. As you consider franchise ownership, the proper guidance will arm you with the information you need to make decisions with confidence and take hold of the life you’ve always wanted.
Credits: Mark Pasma
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Historic Changes in Franchise Prospect Demographics: Millennials Outnumber Boomers Seeking Franchises in 2021
July 21, 2021 – For the first time in history, more Millennials are seeking franchise ownership than Baby Boomers. While Generation X (ages 41-56 in 2021), has shown the greatest share of franchise interest for some years, that share may have peaked in 2020 at 48.2%, based on year-to-date data in 2021 through June.
The Gen-Y or Millennial cohort (ages 25-40 in 2021) is growing rapidly in share, and now makes up the second largest generation of future franchise owners at 24.7%, edging out Baby Boomers at 23.4% of franchise inquiries.
Millenials are already the largest share of home buyers at 37%, according to the National Association of Realtors.
While Millennials (Gen-Y) have outnumbered Generation X in the population for some years, the older Gen-Xers have greater economic assets and more individuals of prime business startup ages. The great news for the franchise industry is that Generation X and Generation Y combine to create a growing population reaching prime startup years in the coming decades.
Boomers (ages 57-75 in 2021) continue to age out of prime business ownership years, and that trend may have been accelerated by the pandemic as seen in increasing recent retirement rates.
The trends noted above may be confirmed once a full year of data is available.
For this analysis, Franchise Insights combined proprietary data from the FranchiseVentures’ demand-generation platform with demographic data from Alliant, a leading provider of U.S. consumer audience targeting and data enrichment and predictive analytics.
FranchiseVentures is the leading demand– and lead-generation platform for potential franchisees to thousands of growing franchise systems in the United States and Canada. Its franchise lead generation brands include Franchise.com, Franchise Solutions, Franchise Gator, Franchise Opportunities, Franchise For Sale, SmallBusinessStartup.com and BusinessBroker.net, and together they provide the largest aggregation of prospective franchise buyers in the U.S.
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