An opportunity for Gen Z?

There are two great opportunities for Generation Z people who don’t want to work for a big company – buy your own business or buy a franchise.

Generation Z (also called Zoomers) are those born between 1997 and 2012. According to an article in the Economist, ?in the rich world there are at least 250m people born between 1997 and 2012. In Canada they represent 22% of the population, about 8.8 million people.? They are projected to be the largest generation in Canada within the next 15 or so years, so they will have a large impact on Canada’s future growth. Zoomers are much better off than their parents’ generation were at the same age.? However, Statistics Canada data for April of 2024 shows Canada's youth unemployment rate (for those aged 15-29) was 12.8 per cent, which marks the highest number for that category since July of 2016 — excluding 2020 and 2021, during the COVID-19 pandemic.

Zoomers are the most educated generation in history and prioritize flexible working environments and a strong work-life balance.

There are two contradictory characteristics of Zoomers. A report from Square indicates that being one’s own boss is a top motivator for 40% of Gen Zers wanting to start a business. However, they are also one of the most anxious generations.? A poll by Gallup showed that nearly half of Gen Zers report feeling anxious, while most crave stability at work. A report from the Society of Risk Analysis ?showed that Generation Z are more risk averse than previous generations.

That is where buying a business or a franchise comes in.

According to the Canadian Federation of Independent Business over $2 trillion in business assets could change hands within the next decade as over three-quarters (76%) of small business owners are planning to exit their business.? Over 90% have no succession plan.

The Business Development Bank of Canada has extensive material to explain the acquisition process and says a good rule of thumb is that a downpayment should be 20-30% of the purchase price.? They also describe the financing options, that include vendor financing and business transfer bank loans.

Franchising is big business in Canada. It represents $117 billion of GDP, making it the 13th largest industry in Canada, and employs almost 2 million people. According to Franchising 101 Canada the benefits of franchising are

Access to Capital: Franchising provides entrepreneurs with access to capital that may be difficult to obtain through traditional business loans and investments. Franchisors often have strong financial backing, allowing them to provide capital to their franchisees. This capital can be used to purchase necessary equipment, expand operations, and secure resources.

Proven Business Model: Franchising allows entrepreneurs to access a proven business model. This model has been tested and refined, enabling new franchisees to start their business with a higher degree of confidence. Franchisors also provide franchisees with extensive training on their business model and operations, further reducing the risks associated with launching a new business.

Access to Larger Market: Franchising enables entrepreneurs to access a larger market more quickly than with an independent business. Franchisors typically have existing relationships with suppliers and customers that can be leveraged to expand operations and generate new business. Furthermore, franchisors often have established brand recognition, giving franchisees an advantage when competing in the marketplace.

Alberta leads the way when it comes to franchise unit growth, representing 46 per cent of all new franchise establishments in Canada, followed by Saskatchewan and Newfoundland & Labrador

Compared with starting an entirely new business both buying an existing business, or a franchise are much less risky. An established business has a track record, existing customers, solid relationships with banks, employees and a reputation. According to ISED about 60 % of new firms survive 5 years, while 97% of franchises opened in the last 5 years are still operating.

Conclusion

Research shows that Generation Z (born between 1997 and 2012) is more anxious and more risk averse than previous generations and seem less likely to want to start their own business from scratch.? Many of them want more control over their lives and want stability.

At the same time three quarters of small business owners in Canada are planning to retire in the next decade.

These two factors may come together to create a perfect opportunity for Zoomers – to earn a living and have better work/life balance than working for a big company by buying? a business or? a franchise.

As highly educated business owners they have the potential to make improvements to their businesses to help with Canada’s productivity problem.

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Peter Josty

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