September 1, 2014

Working After Retirement: Should Grandpa Buy A Franchise?

working after retirement

It’s a fair question.  It’s one that he’s asking himself. So let’s find out why.

It’s a Different World

Grandpa (and/or grandma) may not be having the retirement experience that they thought they’d be having, especially if grandpa was the victim of a corporate downsizing a couple of years before he was supposed to retire.

When grandpa started working, corporate ladder-climbing was the norm. He was led to believe that if he worked hard and made all the right moves, he’ be able to work his way up the ladder. In a perfect world, Grandpa would end up in a much better (and higher) position at the company where he was employed by the time it came time to retire.

And, not only did gramps expect to be making a salary that was in line with his experience and longevity at the company come retirement age, he was also counting on having a nice, fat, company pension to live on. You know what happened to pension plans, right?

Another thing that’s different is job longevity; it doesn’t seem to be as important as it used to be. Today’s HR departments almost expect to see short-term job histories among applicants. What used to be perceived as job-hopping is now looked upon as fast-tracking if done right. And, since grandpa wasn’t a job-hopper, (he was a loyal employee with longevity) his resume is looked at in a not-too-positive light.

Then there’s his age. How many employers are enthusiastically hiring 60+ year-old men? (I know; it’s illegal to turn away job applicants because of their age.)

Working After Retirement: Retirement Reality

In 2005, CEO and Founder of Small Business Trends, Anita Campbell, wrote about the changing face of retirement:

“In the U.S., it used to be that someone reached the magic retirement age of 65 and stopped working. Period. Now many more people ‘retire’ earlier, but their retirements are not traditional in the sense of not working. Retirees take jobs from time to time, and they even start and continue their own businesses during their ‘retirements.’ Their state of employment is based not on some grand career plan set in motion 30 years earlier, but rather on their needs and desires this year or this month. If they need the money or if they simply want more challenge and social interaction, they may take a job or start a business. “

In 2013, I’m pretty confident that a lot of the non-traditional retirements we’re seeing have less to do with a want and more to do with a need. In other words, these people need to make money – even though they don’t necessarily want to continue working.

They’re Starting Businesses

The Kauffman Foundation, in its 2009 report titled, The Coming Entrepreneurship Boom, stated that the highest rate of entrepreneurial activity belonged to the 55-64 age group. The report goes on to state that the average age of technology company founders in the United States is a surprisingly high 39 with twice as many over age 50 as under age 25.

But, they’re not all starting technology companies. Some of them are buying franchises.

The Franchise Way

Buying into a proven business concept (which is what franchising offers) could be the way to go for those that have found themselves out of a job and close to retirement age.  And, while franchise ownership has its risks, it has numerous advantages, too:

  1. Proven concept
  2. Proprietary business systems
  3. Extensive training
  4. Grand opening assistance
  5. Powerful technology
  6. Buying power
  7. Branding

And, let’s not forget speed. People that are nearing retirement age (who want to go into business for themselves) need to be able to open up their new businesses quickly. In most cases, new franchise owners can be up and running quickly.

The ROI (Return on Investment) Time Frame

I regularly provide personal guidance to prospective franchise owners who are 55+. While I’m quick to point out some of the advantages of franchising, I’m also very comfortable providing information on the possible downsides of franchise ownership – especially for those that need to get some income going fairly quickly.

I’ve been saying for years that “franchise ownership isn’t for everybody.” One of the reasons that becoming the owner of a franchise business isn’t always the right thing for people has to do with the money.  In this case, I’m not referring to the up-front investment. Instead, I’m referring to the return on investment (ROI).

If grandpa invests in a start-up franchise, one that will be a brand-new location for the franchisor, it’s going to take a while to get to break-even. Probably a year. Maybe even more depending on the type of franchise it is. If grandpa needs to collect a decent paycheck early on, he’s going to rapidly become frustrated if he chooses to buy a franchise – it’s probably not going to happen.

It’s not that franchising is bad and that it “takes too long to make money.” It’s just math. All startups (franchise or non-franchise) need to have revenue. At first, that revenue needs to pay for things like marketing, inventory, payroll, etc. Eventually, there will be enough revenue coming in to pay for business expenses. That’s when a little bit of profit starts to creep in. It just takes a while.

For people who aren’t quite ready or that can’t realistically retire when they planned to, buying a franchise is one option that may warrant their investigation as long as they’re realistic when it comes to earning a paycheck from their new business right out of the gate.

Did you buy a franchise at a late-age? Are you thinking of doing so?

What do you think – should grandpa buy a franchise?

Senior Citizen Photo via Shutterstock

11 Comments ▼
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Joel Libava - Franchise Expert


Joel Libava Joel Libava is the Franchise Expert for Small Business Trends. Joel, The Franchise King®, equips today’s prospective franchise owners with time-tested, proven techniques designed to increase odds of success. He does this through one-on-one coaching, and gobs of useful content that can be found on places like Small Business Trends, SBA.Gov, and his award-winning franchise blog, The Franchise King Blog . He’s been featured in Entrepreneur® magazine, and is frequently called upon by national media outlets and publications for his no-spin insights into the world of franchising.

11 Reactions

  1. Joel,

    My dad is 74 years old but still an active business man. He was interested in buying a franchise (Circle K) but backed off due to the long ROI.

    Perhaps franchisors who want to tap into the senior market should launch a program which cater the market who wants quicker ROI (with lower initial capital requirement and franchise fee…)

    What do you think?

  2. Yes, Ivan…I saw that.

    I happen to think that the up-front money help is less important than helping older potential franchise owners that need faster ramp-up times.

    Maybe a franchisor can offer THAT.

    The Franchise King®

  3. Ivan,

    That sounds like a great idea.

    Maybe a franchisor or two can offer that.

    The Franchise King®

    • I’m a woman in her 50s who started a franchise 2 years ago ( after a 30 year career in management with several large companies). Joel is right on. The issue is NOT the franchise fee or start -up costs; it is the lack of income. There must be companies in some industries that have both “company owned” locations AND franchise units- I would certainly have considered paying a higher franchise fee for a location that was launched by corporate, and is up and running profitably.

      • Thanks for your insider information, Lee.

        If you’re starting a franchise in your 50′s, unless you have a pretty high net worth, and/or a working souse who’s making a six-figure income, make sure you understand the model.

        And, make sure you won’t need much income for a couple of years, at least. You’re still investing a start-up business…it’s just a franchise business. (But you have more tools to work with-because it is.)

        The Franchise King®

  4. Joel,

    The start up, franchise fees and the working capital are critical as these factors are the basis of this discussion. Businesses fail due to owners having inadequate working capital, correct? And the point about having a spouse or significant other with a good income, benefits to share (like coverage for medical insurance) are a huge plus. Take the same person, one who is single and one who can count on another for mortgage, benefits, and related expenses mentioned above. The single person will have a much tougher time with the business. Unfortunately the single person has some bad habits like the others; he/she likes to eat and would rather keep good credit, stay out of jail. Darn, these things that living things require can be troublesome.

    I feel the above discussion leads to an important screen for a franchisee investigating a franchise. If the franchisor will take anyone that has the net worth and liquid capital necessary, then the potential buyer should probably run. This is kind of rare but you talk to many franchisors who have stated that they should not have brought some franchisees into the system. Be a little suspicious, like Groucho Mark who said “I don’t know if I want to be in an organization that would take me” or something related. On the other hand, ask a franchisor if they provide financing, even if their advertising states no financing, third party or otherwise. They can work something out on payments, perhaps even interest free if you are lucky. This can work if they like you. Of course you must speak to a decision maker like the president, owner or similar type. Of course this helps for franchise fee and not the ongoing costs but it is a start.

  5. Thanks for commenting, Tom.

    I am a true believer in would-be franchise owners thoroughly investigating franchise opportunities that they’re interested in, too.

    It’s about safety.

    The Franchise King®

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