The profits of student franchises
// Jeff Maertz

With the promise of hefty profits and valuable experience, university students across North America have been flocking to manage student-run painting businesses for the past three decades. In theory, it’s a great business model where everybody wins: the home owner gets their house painted by charming young people, university students get above-average-paying jobs, and student business owners gain managerial experience. However, there’s more to the story than that.

For two years, I worked as a painter for one of the large student-run painting businesses in North Vancouver. Hence I had a pretty good idea of what I was getting into when, in the third year, I signed up to run my own painting business. At the end of the summer, though exhausted, I was satisfied with what I had learned, as it was the experience of running my own business that I’d done it for. Unfortunately, I only earned around $5,000 for eight months of hard work, which was well below what I’d anticipated.

I had two options for placing my blame – I could either claim responsibility for not making as much money as I had hoped for, or blame the system that I was working within (the painting business). In the end, I decided that both I and the painting franchise company were responsible. No question, if I had put in more 12 hour days instead of ten, or had been more skilled at selling painting jobs to prospects, I would have earned more. Having to pay out a quarter of my revenues to the franchise company certainly put me at a disadvantage, though.

Similar to other franchises – like Dairy Queen or 7-Eleven – the painting parent company grants licenses to individuals to use their brand name and products in return for a cut of the revenues or profits. They also provide training and operate a nationwide call centre, which books painting estimates for franchisees. The franchise owner, however, does everything else. You’re responsible for advertising, selling, hiring, painting, and accounting – the same tasks that any other small business owner has to do. To put it simply – the franchise company provides the franchisee the framework to work within and then it’s really up to you to run your own business.

Everything sounds good up to this point, but here’s the catch: the franchise company takes up to a quarter of your revenue. It’s important to point out that this is revenue, not profit. So even if you break even on a job and have priced a job to cover your labor, paint and overhead costs, you are still on the hook to pay 25 per cent of your revenue to the franchise company. In effect, you have to charge every customer 25 per cent more than your competitors just to break even. Nobody wants to just break even on a job, though; you of course want to earn profit for yourself. Add to this the fact that the painters you hired are unskilled students, usually with no previous painting experience, and it’s a hard question to answer when customers ask why they should pay more for lower-skilled workers.

With that said, though, the work experience is great. The training they provide is hands-on, and I feel like I learned more in my eight months running the painting business than I did in three years of university. For those of you who are thinking of opening a small business in the future, running a student painting business is a great introduction to entrepreneurship.

Also, it is possible to make some good money doing it; you just have to be a little more skilled and determined than I was. However, if you’re only looking to create profit, you would better off just starting your own painting business without the help of a franchise. This is particularly true if you already have painting experience and have friends or family that need their house painted (a great place to start building up your reputation and references).

The bottom line is that while student-run painting businesses are not scams or pyramid schemes, they do take a lot of money from their franchisees. If you just want to make heaps of cash in the summer, there are easier ways than this to make money. If work experience and small-business training are more important to you, then running a small painting franchise might be a perfect match. If you are considering running one of these businesses, however, make sure you do your research first and thoughtfully weigh the pros and cons.

//Jeff Maertz, columnist

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