Franchises Play Expanding Role In Marketplace As Corporations Downsize, Franchises Can Fill The Void

Carl Sheran had a vice-president title and 24 years of service at DuPont when he realized that his career at the chemical company had stalled.

“I was working in Mexico and trying to come back to the states,” said the 52-year-old Newark, Del., resident said. “But as a result of downsizing, there really wasn’t a place for me.”

After leaving DuPont in 1992 and trying another job for a year, Sheran took his savings and opened a franchise of The Huntington Learning Center, a tutorial and test preparation company. Almost a year later, he says it was the smartest move of his life.

As corporate America reshapes itself, former executives like Sharen are channeling their talents toward franchising, one of the few growing segments of the business world today.

“You have many executives out there that can’t find the same job that they left or were forced to leave,” said Michael H. Seid, managing director at Strategic Advisory Group in West Hartford, Conn. “Franchising gives them something they can own and use their skills and have input in.”

Buying a franchise gets the businessperson permission to use the parent company’s brand name and training on operating the business. The franchisee then runs the facility under the company’s supervision and typically sends a portion of the profits back to the home office.

Franchises already account for one out of every 12 business units in the United States and represent 40 percent of retail sales, according to the International Franchise Association, a Washington-based trade association.

But increasingly franchises no longer mean McDonald’s or Burger King. More service-oriented and educational companies are moving into the field to serve corporations that cut entire departments and look for outsiders to handle functions ranging from accounting to packaging.

“Concepts are coming directly out of corporate America,” said Don DeBolt, president of the International Franchise Association. “Franchises are filling a void where big businesses had to cut back.”

In addition, qualified and capable employees are out of work, but still eager to use their skills. According to Challenger, Gray & Christmas, Inc., an international outplacement firm in Chicago that tracks job cuts daily, more than 300,000 jobs were cut in the first nine months of 1995.

The cuts have meant an influx of highly qualified businesspeople to franchising, boosting the skills of the franchiser as well as giving laid-off executives another chance to show their talents.

And as an alternative to free-lance consulting, running a small franchise business can mean regular pay and benefits from the parent company.

But opening a franchise isn’t like starting a small business. Parent companies insist on strict oversight, restricting much of the freedom and flexibility of the business.

And a franchiser not only has to run the business, but is frequently the secretary and courier service.

“Corporate America is not in the business to produce Robinson Crusoes that can live off the land,” said Philip Zeidman, a Washington attorney who specializes in franchising. “When you open a franchise, you have to cope with the daily needs of the workplace which you probably did not have to worry about before.”