Kids Can’t Find a Job? Buy Them a Business - The Juggle - WSJ

Kids Can’t Find a Job? Buy Them a Business - The Juggle - WSJ

* July 27, 2010, 10:30 PM ET

By Sue Shellenbarger

Associated Press
Would you buy a franchise for your kid to run?

Many parents will readily make a five-figure investment in a college education for their children, usually with the hope that their kids will be able to make a good living. But would you spend as much or more to buy a business for your adult child to run?

Now that many college grads are working for minimum wage — or not at all — a few parents are going the extra mile, and buying a business for them to run, instead of, or in addition to, paying for college. That may seem risky and expensive, and it is; parents risk losing their entire investment, and more. But some of these parents see entrepreneurship as a chance for their kids to reclaim a piece of the American dream –- control of their own destiny and a chance to gain wealth.

For today’s “Work & Family” column, I interviewed 10 parents who had purchased new businesses for this reason. These parents believed that even a startup – as risky as that can be – offered brighter hopes than a corporate job in this rocky economy.

There are some success stories. One dad saw his son, a college athlete with a business degree, unable to find anything but a job selling computer software by phone. Eager to give him a better start, he purchased a business-services franchise for his son to run. The business is doing well. Another couple financed a fast-food restaurant for their son to run; the son sacrificed his social life and worked a lot of 18-hour days for a couple of years, but the restaurant is a success and he will expand to a second restaurant soon.

But these parents know they are taking a big risk. All bought franchise businesses, which research suggests are as risky as any other business startup. All are risking their entire investment, their life savings, or more. Families’ financial arrangements vary widely. Some parents view the investments as a loan, although payback arrangements were flexible, contingent on future profits. A few parents regarded the money as an outright gift. Others, meanwhile, see themselves as silent partners and said they hope to work part-time in the business with their kids after retirement, or expect their kids to support them in old age. Whatever the terms, buying a franchise can expose parents to very large potential losses; some have lost hundreds of thousands of dollars following this path.

The setups can be stressful for parents and children alike. Parents try to strike the right balance between meddling too much and protecting their investment. And adult kids would prefer to be financially independent; some had to move back in with their parents to get their businesses off the ground.

But the parents I interviewed said that so far, the potential rewards justified worth the risk. “As a parent, the best gift you can ever receive is to see your children happy and successful,” one father said.

I found these parents’ dedication and self-sacrifice pretty inspiring. But while I would be delighted if one of my kids wanted to start a business, I wouldn’t, or couldn’t, take the role of their banker. Such a setup seems too potentially stressful, risky and expensive, for parent and child alike.

Readers, what do you think? Are these parents too invested in their adult children’s lives or are they giving them a leg up in the rat race, akin to funding an education? Can you imagine any circumstances that would motivate you to do that? Is business ownership a better investment in your mind than a college degree?