American Economy So Awful Parents Now Buying Franchises to Keep Adult Children Employed

[girl gone mad]

What I find interesting about the original WSJ piece is that some affluent parents are opting to fund these business purchases instead of paying for (more) college education for their kids.

http://blogs.babble.com/strollerderby/2010/07/30/american-economy-so-awful-parents-are-buying-franchises-to-keep-adult-children-employed

The American economy is so awful, the Wall Street Journal reports that parents of means are now resorting to buying franchise businesses to keep their adult children employed, shelling out six figure sums to purchase their little darlings Pita Pit restaurants and College Hunks Hauling Junk moving trucks:

Watching fellow college students working for $7.50 an hour after graduation, Tana Walther, a fashion-design major at Kent State University in Ohio, snapped up an alternative offered by her father — to run a Pita Pit restaurant he would buy.

“I guess I bought her a job,” says her father, Jan Walther, of North Canton Ohio. Prospects of a career in fashion seemed remote, and Tana, a college athlete, loved eating at Pita Pit restaurants while traveling with her track team. Her first new restaurant opened last year near campus in Kent, and the 25-year-old hopes to open several more.

Before we all let out a collective “yuck” let’s take a look at what’s driving the trend.

First up, of course is the economy. According to the Pew Research Center, unemployment among those aged 18-29 is higher than it has been in decades, with job offers for new college graduates half of what they were in 2007. Applications to law and business schools are soaring as students, desperate to find a safe harbor during the Great Recession, decide to use the time to burnish their credentials for when the economy improves. Even non-paying internships have become so competitive that enterprising charities are making a mint auctioning off gilded gigs at Vogue and other prestige firms.

[Arctic Dave]

1. Shouldn't they pull up their own bootstraps?

Must be nice.

[bahrbearian]

13. Hey Daddy worked hard for his money.

And GrandDaddy worked hard to get, Daddy a job at the Bank.

[BrklynLiberal]

2. Yep. Heard that report on the radio yesterday....

[MineralMan]

3. What a great idea! I'll mention it to the guy down the street who's

waiting for the bank to foreclose on his house. He could buy a franchise for his daughter who just graduated.

Oh...wait...

Never mind. This is only for rich fucks.

[MineralMan]

4. Cool! I can hear it now...

"Well, Chad, you're graduating in June. Here are the keys to your new Lexus and you can drive it down to the Pizza Hut I bought for you. Who needs college, after all, these days?

[w4rma]

5. With massive wealth differences comes nepotism. (nt)

[monmouth]

6. Anything to keep them from moving back in.....n/t

[dkf]

7. Damn I know someone who was going this route.

I didn't realize it was fairly common.

[izquierdista]

8. Being rich and being wealthy

There is a difference here. Being rich means being able to put up the money for your daughter to own a franchise. Being wealthy means being able to cash all those franchise fee checks sent in from all those daughters each month.

[readmoreoften]

9. What people don't grasp is that being able to buy a franchise IS middle class. Few of us are middle

class. We're working class. Doesn't matter what color your collar is, as Carlin says. Small business and franchise owners and the lawyers and the accountants who sustain them are the middle class. People who make $20 an hour and can get a mortgage and a fancy TV aren't "middle class"; they're also working class. People who make $50K a year can't shell out $300K to buy a franchise for their kids. Some members of the working class are poor. Some members of the working class are "getting by."

[sendero]

20. A Taco Bell..

... franchise costs between $1.2 and $1.7 million dollars, plus the land.

Middle class is not going to get you one of those.

[happyslug]

22. Depends on one's definition of "Middle Class"...

I have had clients on Welfare who called themselves "Middle Class" and I have seen multi-Millionaires call themselves "Middle Class". To be "Middle Class" has since WWII, been the place to be, you are not "poor" and you are NOT "Rich". The problem is defining "Poor" "Rich", "Middle Class" and the almost disregarded term "Working Class".

The person you responded to did address that issue. With Median Income around $50,000 half of the population earns less then that and half more (People who earn $1 million dollars a year are NOT included, to include such people pushes up the Median to much). Roughly 90% of the population will earn between $20,000 and $ 80,000 a year.

http://upload.wikimedia.org/wikipedia/commons/thumb/6/66/Income-curve-%2

About 6% of the population earns more then $150,000 per year, less then 16 % earns more then $100,000.
Slightly more then 30% of the population earns less then $25,000 a year, Slightly more then 8.5% of the population earns less then $10,000 a year.

With those numbers we can have a rough I idea of what is "Poor" and "Rich". About 10% of the population tends to be on Welfare or receiving some sort of Government Assistance do to being poor. The US Government has determined that you need $674 a month ($8088 Dollars a year) to survive. If we accept that figure as "poor" then under 8.5% of the population is "Poor" (i.e. those earning less then $8088 a year). The difference between $50,000 and $9000 is $41,000 (I am rounding up for easier calculations). If we add $41,000 to $50,000 we come to %91,000 which leaves about 15% of the population earning more then that figure and thus "Rich".

Now under pre-WWII use of the term "Middle Class" that would be the groups just under the Rich, but then the term rich was reserved to the top 5%, thus in pre-WWII days that would be the people earning between $90,000 and $150,000 today or about 10% of the population (Which also happens to be the traditional percentage of the "Middle Class" to the people as a whole).

The problem is since WWII, we have been told we are all "Middle Class", even the 10% of the population that are "Poor". Thus has lead to a tendency to lower the numbers for both the "Rich" and "Middle Class".

Now, in the 1970s, a poll was done that showed most people called themselves "Middle Class" but if you added in the term "Working Class" to such a poll, it split the "Middle Class" results in half (I.e. 5% Called themselves Rich 5% called themselves poor, about 45% of the Population called themselves "Middle Class" and about 45% called themselves "Working Class"). These numbers seems to hold in polling but not in relativity, to few people call themselves "Poor" among other major errors including no definition of the terms used in the Poll except as to what class you belong in (I have NOT heard of any results since the 1970s).

The Federal Government has also had a problem with these numbers, for example anyone under $50,000 is "Low Income" when it comes to Federal Housing Assistance (and I will NOT go into the Low-Low Income and Low-Low-Low Income definition adopted in 1974 so to make sure Public Housing Agencies rent to people on Welfare instead of keeping them out of Public Housing, which had been the norm before 1974).

Thus if we use pre-WWII definitions, 75% of the population are "Working Class" i.e. excluding the 10% who were poor and the 5% who were rich and the 10% who were "Middle Class". This seems to be the best way to look at the numbers but it is NOT as popular definition as it should be.

If we use the pre-WWII Definitions then the Middle Class can be the source of the Cash to provide such fundings. They are making $90,000 to $150,000. You can borrow (When banks were doing their jobs correctly) up to about 20 times you annual income or roughly 2 to 3 million. Thus they have the money to support such a loan.

If you are calling people who are earning less then $90,000 "Middle Class" instead of "Working Class" then the numbers are NOT as nice. The prices tend to be beyond the top end "Working Class" parent can provide (And way beyond what lower end "Working Class" parents can provide).

Thus my point is that the key is how you define "Middle Class" not if the "Middle Class" can do this or not.

[d_r]

12. BINGO

And being the rest of us means working for those pricks or trying to find a coupon to take our kids there.

[CrispyQ]

18. ...

"Wealth is passed down from generation to generation, you can't get rid of wealth. Rich is some shit you can loose with a crazy summer and a drug habit." ~Chris Rock

[CoffeeCat]

10. Epic FAIL!

I don't mean to rain on the parade of the rich folk--but what will happen to the Pita Pit when a 25-year old who
knows NOTHING about running a restaurant gets her mitts on it?

Buying a little franchise might be a convenient way to avoid the worst embarrassment any upper-class, elite, country-clubbing
family could imagine---their little darling working at Walmart or lifeguarding at the local pool. But buying their twenty-something
a serious business is not the answer.

These kids have probably had everything handed to them through their entire lives. They've most likely never worked hard at
anything, let alone run a business with dozens of employees. Running a restaurant takes managerial, organizational and
leadership skills.

Muffy will have to hire and fire people, handle inventory and order supplies as needed, maintain employment schedules, deal
with marketing and advertising and ensure that customers are happy and that the food is safe and properly prepared.

Restaurants have the highest failure rate of any new business (dry cleaning has the lowest). So mumsy and dadsy really
rolled the dice here.

My guess is that Muffy will work a few hours a day, hire her BFFs to work with her--and when they're not texting each
other from the drive-thru--they'll end up giving away free food to their friends and running the place into the ground.

I see the obvious main point of this article--that rich parents are creating jobs for their kids. I just thought I'd
point out that money can't buy lots of things--and it can't turn your spoiled child into an intelligent, savvy entrepreneur
overnight!

[Crazy Dave]

16. I'm sure the ownership is just that

She gets to tell all her friends and daddy gets to tell his friends that she owns the place but really all she'll do is collect a check and pay some other poor 25 year old to actually run the place for $8 - $10 an hour. These days you can get someone with an MBA to work for that.

[golfguru]

27. Right U R, buying a franchise does NOT guarantee success

if the son/daughter has no business sense and does not work
long hard hours, franchise will fail more often than not.

[Stinky The Clown]

11. Seems to me it would be easier to just by Muffy or Skippy a gameboy or X-box and make their Bimmer..

payments.

[CrispyQ]

19. See response #6.

;)

[SocialistLez]

14. Wouldn't it be easier and less risky to just give the kids the money?

I don't know ANY "middle class" people out there buying franchises.

[Crazy Dave]

17. Sure there is, selling Tupperware, Avon, Amway, etc.

;-)

[Crazy Dave]

15. I know a guy who ran his business 40 years and had his kids there

Honestly, nobody wanted to be those kids. They were paid the same or less than the other workers there and they were expected to work harder than the rest of us. For the non-family employee mistakes were tolerated and forgivable but God help one of his kids if they made even a small one. They'd get yelled at in front of everyone and get their pay docked.

The kids put up with all the abuse because one day they thought it would "all be theirs" and that one day came. The dad told all his kids working there that they would have to "buy in" to the company, nothing was going to be given to them so they all quit except for two who now run the business.

[Taitertots]

21. Now the rich seize the opportunity to buy all the decent jobs for their unqualified children

The Plutarchs take one more step to ensuring a permanent lower class.

[Xenotime]

23. So...the weathy stimulate their own children but not the community... That's pure greed.

[raccoon]

24. I feel sorry for those who have to work for these brats. nt

[OllieLotte]

25. I think this is a great idea.

Gets money off of the sideline and promotes hiring.

[DaveJ]

26. This would work -- if it weren't minumum wage employment

With every fast food job created, these rich assholes drive down the average salary rate. So this is not good for the country.

Their strategy is simple -- you work for slave wages while I get rich. I don't use the word 'hate' lightly but I truly hate that business approach.

I've mentioned before that businesses should be required to obtain some kind of license to pay people a non-livable incomes. They should be able to prove that they employ kids that live at home, or ex cons living in halfway houses or something.

I have no animosity toward people who inherit. It is the type of business that concerns me.

[fasttense]

28. Wait a minute, where do they think they will get the customers??????

Most fast food dumps and chain restaurants around here are hardly making ends meet. So many people have quit eating out that most of the fast food and chains are in bankruptcy negotiations.

I should note that the independent restaurants are doing a whole lot better. I don't know why but the Mom and Pops are holding their own while the Red Lobster has closed down.