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Older operators make a mark on franchising

October 7, 2009 by By Deborah L. Cohen, Reuters.com

CHICAGO (Reuters.com) - Prior to the economic downturn, Eric Diaz was managing a department that handled futures systems for Merrill Lynch in New York. Today he's a full-time pet groomer, riding around Hudson County, New Jersey in a tricked out Mercedes van replete with two 65-gallon water drums, a hydro tub and a host of shampoos, conditioners and other doggie styling aids.

"I really love doing this," said Diaz, who purchased his Aussie Pet Mobile franchise outright in December 2008 after taking a voluntary retirement package from the troubled investment bank in May. He had looked at several other franchises, including check-cashing and tax-preparation concepts before deciding he wanted to get as far away from the financial world as possible.

"I used to go home mentally exhausted," said Diaz, who for competitive reasons declines to disclose the details of his franchise purchase. "Today I am pressure free."

Diaz is characteristic of a new wave of entrants into the world of franchised systems, the proven business ideas that after the expense of licensing fees, equipment and other costs, offer would-be entrepreneurs access to operational guidelines, well-known brands, marketing and a network of other franchisees they can turn to for support.

NO MORE MERGERS

"We've received the most franchise requests ever from folks who had been formerly working at companies that had downsized," said Tom Friday, founder and CEO of Knockouts, an Irving, Texas-based chain of franchised hair salons catering to men. "They don't want to go through any more mergers."

According to recent surveys from the franchise research firm FRANdata, the majority of people polled at franchise expositions who were seeking data about opening their own franchisees - some 46 percent - were in the 40-to-55-age bracket. The second-largest group, representing 28 percent of respondents, were entering retirement age at 55 to 70 years old, according to the firm, which surveyed hundreds of participants attending five expositions in 2008 and 2009.

"Those that are over 40 are interested in changing careers," says FRANdata President and CEO Darrell Johnson, adding that in this difficult financial environment older candidates are likely to have more access to start-up capital amid scarce bank financing.

That was the case with Bill Johnson, a newly minted operator of a children's mobile party franchise called Games2U. Johnson, who operates near the Gulf of Mexico in the oil-rich town of Lafayette, Louisiana, purchased his franchise outright three months ago for roughly $165,000, including franchise fees. The former owner of an oilfield services company came out of an eight-year retirement after he saw his nest egg take a substantial hit in the stock market. Johnson says he knew it would be difficult to find a job working for someone else at age 59, so he took a chance on the franchise.

Now he spends his days driving a souped-up party van from house to house, as fun-frenzied kids scramble inside to play Xbox and Wii, and jump at the chance to roll around in giant, child-sized hamster balls. Plus, Johnson gets to spend time with his two daughters, who he says are learning valuable lessons about running a business.

"It's an easy sell," said Johnson, who charges about $350 for the average party. "All I have to do is show the van and they book themselves."

Older operators are becoming more typical at franchise systems ranging from fast-food chains to corporate cleaning services and retail outlets.

"So many older Americans are having difficulty finding a job," said Arthur Koff, founder of retiredbrains.com, a web site offering career information for seniors, and the author of "Invent Your Retirement Resources for the Good Life."

"A fairly large number of people are interested in franchises," he said.

In addition to frequently bringing financing sources, these seekers of second careers often come with a wealth of experience accumulated from prior jobs, said Dina Dwyer-Owens, chairwoman of the International Franchise Association, a trade group, and CEO of the Dwyer Group, a holding company for six franchise companies in specialty services such as residential plumbing. Older candidates also understand what it takes to work with a corporate structure.

"They've done their homework and realize you don't have to go through the school of hard knocks," said Dwyer-Owens, who recently testified before Congress to push for more financial support for small businesses. "They're more likely to follow the system, especially if they've had a tough time." Indeed, a tough time is what has driven many in this age bracket to consider opening up shop under the fold of a tested model.

A LEAP OF FAITH

"I felt like it was a sure thing," said Elizabeth Winterhalter, a former teacher.

Winterhalter, along with her husband Monte, who was recently laid off after 35 years as a regional executive with retailer J.C. Penney, are staking their claim on a Red Mango frozen yogurt franchise that is expected to soon open in McClean, Virginia.

The investment, being funded with proceeds from their sale of their former house, is estimated to cost between $250,000 and $400,000, depending on the final choice of real estate, Winterhalter says.

"We're using the money from the house to buy the franchise," she says. "It's a huge leap of faith."