Every month Aaron will be answering questions from readers regarding the franchise industry. Feel free to send him your question to [email protected] and maybe it will be answered in a future edition of 1851.
I just graduated this year from high school and my parents gave me two.....
I just graduated this year from high school and my parents gave me two choices. I can go to college or use the money we’ve saved to start a franchise business. Which do you recommend?
Parents Are Needing Definite Answer
Even though Pandas are black and white the answer to your question is grayer in nature. Let’s dive deeper into your quandary to see what we find.
According to the Institute of Education Sciences, the average cost of college per year for undergraduate tuition, room, and board were estimated to be $14,300 at public schools, $23,300 at private for-profit schools, and $37,800 at private schools, with no downturn in sight. With the job market the way it is, and unemployment in the U.S. for millennials at an unheard of 8.3 percent, according to the Pew Research Center, a lot of new graduates and parents who are paying for college are scratching their heads wondering, “is college worth it?”
Entrepreneurial-minded millennials around the nation are forgoing college altogether to start their own businesses. For instance, Thiel Fellows is awarding 20 teens $100,000 over two years to launch their own business – the catch; they have to drop out of college.
Jason Parker started a dog-walking business, K-9 Guardian Professional Pet Sitting, with his brother in 2002 at the age of 12; his brother Steven was 15. By the time Parker graduated from high school, his company was worth six figures.
“My mom is a school teacher and my dad has an MBA, so there wasn’t any question in our household whether we were going to attend college or not. The answer was ‘you’re going’”, Parker said. “It was quite the shock to both my parents when I announced that I was skipping college and using the money saved from my business to open a dog hotel.”
Parker said the decision was a difficult one on several levels. His brother, Steven, wanted to use the money to buy himself a Mustang SVT Cobra while Jason Parker had his eyes on a brand new BMW 330i. The brothers resisted the splurge and instead decided to pursue the dream of owning their own business.
In 2005, the Parker brothers opened K-9 Resorts Daycare & Luxury Hotel in Scotch Plains-Fanwood, NJ. In 2011, K-9 Resorts became a franchise. Today the franchise operates four locations with seven more expected to open by the end of 2015. The franchise was named No.1 Pet Service by New Jersey Monthly Magazine and The Courier News.
“I definitely wouldn’t recommend skipping college unless you have certain and specific circumstances,” Parker said. “We had a plan and profitability and didn’t want to lose momentum or miss the boat with our business idea.”
Parker added that now his business is up and running, he is planning on taking college courses at Harvard University this winter to learn more about best business practices and contract negotiations. He also believes in paying it forward and is a presenter at Barkleigh Productions’ Expos to educate attendees on how to own and operate their own dog hotels.
Kyle Norcutt from Grand Rapids, Michigan convinced his stepfather to co-sign on a $10,000 business loan when he decided to start his own business at 23. After high school, Norcutt attended a local community college to get his Associates Degree but dropped out when he landed a full time job in sales.
“Even though I was good in sales I knew it wasn’t a long term destiny,” Norcutt said. “There wasn’t enough control or consistency in the results.”
A brother of a friend owned a moving business and after he and Norcutt visited it, they decided they wanted to start their own. Rather than start from scratch, the best friends decided to buy a TWO MEN AND A TRUCK® franchise.
The two young men opened their first location in Raleigh, North Carolina in 1998 and worked hard to keep their overhead as low as possible.
“We were literally ‘two men and a truck’ when we started. We didn’t have any employees, we did all the scheduling and moving ourselves and our apartment was our office,” said Norcutt.
Through hard work and saving money, the men were able to buy another location in Durham which eventually Norcutt was able to sell, along with his portion of the Raleigh location, when he decided to move back to Michigan to start one of his own in Kalamazoo.
In the economic downturn of 2008, Norcutt was given the opportunity to buy a corporate location in Texas. His gamble paid off and today he now owns 15 TWO MEN AND A TRUCK® locations in Texas, Oklahoma, Colorado and Michigan.
“I joke with my stepdad now about how worried he was that I wasn’t going to be able to pay back that small business loan he co-signed,” added Norcutt. “Today my drivers burn over $10K a week in diesel fuel.”
Norcutt, like Parker, agrees that college is a good choice for most but wasn’t the right fit for him. He said that he was always an entrepreneur, mowing lawns and starting his own lawn care business in high school, and only interested in school subjects that dealt with business management. However, he tells his own kids that they will have no choice but to go unless they have a good plan for not going.
When asked what it takes to be a good entrepreneur Norcutt said the most important things are to, “Learn how to budget, live within your means, take care of the customer and hire people that take ownership of the business.”
Although there are stories of people who skipped college and achieved financial success, for most Americans, the path to higher future earnings involves a four-year college degree.
On May 5, the Federal Reserve Bank of San Francisco released an Economic Letter citing that the average college graduate paying annual tuition of about $20,000 can recoup the costs of schooling by age 40. After that, the difference between earnings continues such that the average college graduate earns over $800,000 more than the average high school graduate by retirement age.
Betsy Mayotte, Director of Regulatory Compliance at American Student Assistance, says the typical college student loan is $30,000 and takes about 15 years to pay off at $300-350 a month.
“Only 56 percent of students complete a four year degree within six years,” Mayotte said. “The problem is a lot of people don’t know what they want to do when they enter college. Seventy five percent of students change their majors while in school.”
Mayotte’s recommendation for students who aren’t sure of their future is to attend a less expensive accredited college or university their first two years until they figure out what major they want to pursue and then transfer those credits over to their dream school for the last 2 to 4 years.
“The overall default rate for student loans is 14.7 percent, and the most likely to default are those students that drop out of college,” Mayotte added.
Certain franchise opportunities have low entry fees to entice millenials who want to start their own business but want the support franchise brands provide including advertising, marketing, public relations, purchasing, technical expertise and strength in numbers. Some examples include:
Buffalo Wings & Rings - $5,000 franchise fee
With 45 units in the United States and abroad, Buffalo Wings & Rings has reduced its $35,000 franchise fee by $30,000 to make the franchise more accessible for young entrepreneurs looking to get into the sports restaurant/wings niche. Established in 1984 in Cincinnati, Ohio, the sports restaurant franchise has always been committed to giving customers the absolute finest wings in the world. Over the years, the brand has pioneered and perfected the art of homemade sauces, customizable heat profiles and fresh wings, as well as grown to offer specialty burgers, gyros and salads to cater to its customers and provide options for the entire family to enjoy.
Mosquito Joe – $15,000 franchise fee
Virginia Beach, Virginia-based Mosquito Joe provides mosquito control treatment to residential and commercial customers nationwide. Technicians are trained mosquito control experts dedicated to getting rid of mosquitos so people can enjoy being outside again. Although each Mosquito Joe is an independently owned franchise that offers customers reliable and effective service from a trusted community member, it is also backed by a national network of technical expertise.
Palm Beach Vapors - $20,000 franchise fee
Palm Beach Vapors is franchising’s first e-cigarette and vapor retailer. Founded in 2013, the company has seen exponential growth that mirrors the country’s interest in kicking the smoking habit. Based in Tulsa, Oklahoma, Palm Beach Vapors has franchises in Alabama, California, Florida, Indiana, Mississippi, Missouri, Oklahoma and Texas. Palm Beach Vapors represents a true pioneering concept in a rapidly expanding space.
So, PANDA, if you decide to invest in a franchise you will want to make sure you are looking at it as a long term investment and live within your means while you get it up and running. If you decide to go to college, pick a major that will give you the best ROI on your investment and find a loan that won’t break your bank into your 20’s and 30’s.
Hope this helps.