Iconic Tour

How this 21-year-old became a dorm-room millionaire

At 19, University of Virginia student Dylan Patel opened his first Orangetheory franchise. He soon opened two more and is set to open a Hand & Stone Spa in September.
Source: Dylan Patel

Driving to the grocery store one day in Richmond, Virginia, high school senior Dylan Patel spotted droves of people flocking toward an orange tent. Curious what the commotion was about, Patel pulled over and staked out in the parking lot, where he watched employees dressed in neon orange outfits distributing flyers and talking to prospective customers.

Patel went home that night and Googled the company's name: Orangetheory Fitness. What he found was an innovative, high-intensity workout program — "a fitness class that aims to be for interval training what SoulCycle is for Spin classes," according to GQ. But he found something else, too — something he'd been contemplating for quite some time: an opportunity to launch his entrepreneurial career.

In January 2016, while a freshman at the University of Virginia, he signed a contract with Orangetheory Fitness to open his own franchise, thanks to a generous loan from his parents and some bank loans, roughly equaling a half million dollar. The doors opened the following October, in Newport News, Virginia. But he didn't stop there.

In addition to juggling a full course load at one of the best public universities in the country, the 21-year-old business and finance major now owns three Orangetheory locations throughout Virginia and invested an additional $500,000 into a second franchise, called Hand & Stone Massage and Facial Spa.

The franchises are each in different stages of their life cycle, with the second Orangetheory opening in July and the third expected to launch this fall. The original Orangetheory, meanwhile, is pulling in slightly less than $1 million annually, revenue that Patel has used to finance his other ventures. Patel purchased his first Hand & Stone in May, and although the franchise just opened, the spa has recruited 100 clients in just two weeks.

Twenty-one-year-old college student Dylan Patel purchased Hand & Stone Massage and Facial Spa in May, bringing his total to four franchises in just two years.
Source: Dylan Patel

The story of the young, aspiring billionaire building a company out of their garage or dorm room has become a modern-day archetype. Zuckerberg, Jobs, Gates — the list goes on and on. But in an increasingly saturated business world, it can be difficult — seemingly impossible — to come up with both a novel and viable idea.

But some creative and precocious millennial minds have discovered an alternative to traditional entrepreneurship: franchising. According to FRANdata, a market research firm that analyzes franchise performance and operations, 9 percent of all franchises are currently owned by millennials, and the trend is growing. Over the next 10 to 15 years, the majority of existing franchisees will be approaching retirement, while in that same timeline, more millennials will reach the capital threshold needed to invest in a franchise.

A balancing act

So how does a 21-year-old college student find the time to run four franchises and manage nearly 50 employees?

Patel has been fortunate enough that each franchise has opened during summer vacation, meaning he gets at least a month to work out the initial kinks, he said. He also claimed that having reliable managers substantially eases his workload. Still, it can be difficult to balance schoolwork and ownership duties.

"There are some days where I want to come home from school after two or three tests and just hang out, watch some Netflix," Patel said. "But sometimes that's not possible."

Millennials are popping up in earnings calls this season
Millennials are popping up in earnings calls this season

Patel tries to schedule most of his classes in the morning so he can spend the rest of the day taking care of business matters. He claims that he can get a lot done in the time between classes, often communicating with his managers and taking conference calls on the go. Thursday nights are dedicated to payroll, which Patel said is one of the most demanding responsibilities of being a franchise owner.

As for his plans post-graduation, Patel wants to continue learning about the business world through hands-on experience, with the hope of one day embarking on a career in investment banking, private equity or real estate. But there will always be a place in his heart for franchising, which he highly encourages aspiring entrepreneurs to get involved in.

"There are a lot of resources out there and a lot of people willing to help you," Patel said. "Before buying my first Orangetheory, I reached out to a couple local franchisees and they were so helpful. ... The best part about franchising is that each one has a unique backstory and established branding. You don't have to reinvent the wheel."

A young biz model

Patel is far from the only millennial to discover the perks of buying into a proven business model.

"The millennial generation is known for its entrepreneurial spirit, so it's no surprise that many young entrepreneurs are turning to franchising as a way to grow their businesses," said David McKinnon, chairman of the NextGen in Franchising Committee, an arm of the International Franchise Association. "The franchise business model is a proven system that's been transforming and scaling young concepts for years, but millennials are just now realizing that it's not solely reserved for big, established brands."

When the Perez sisters purchased the San Antonio Wing Zone, the location had been struggling to stay afloat. Now they are pulling in monthly sales of around $170,000.
Source: Jessica and Andrea Perez

A willingness to take risks seems to be a driving factor for millennial entrepreneurs. Take Andrea and Jessica Perez, for example, two San Antonio-based sisters who are the franchisees of the local Wing Zone, an Atlanta-based restaurant conceived as "an alternative to late-night pizza delivery." The 20-somethings originally sought to buy the restaurant as a way to bring their family together, since their father, an executive in the music industry, was often forced to be away on business for weeks at a time.

The minimum liquid capital required to purchase a Wing Zone is $60,000, in addition to a $25,000 "franchise fee" and other miscellaneous costs. The way most franchisees get their funding is through loans, the sisters said, but by spending time developing a meticulous and convincing business plan, they were able to solicit a generous investment from their father.

Today the sisters run Wing Zone like a well-oiled machine, with monthly sales of around $170,000, but it took some heavy lifting to get the business off the ground.

"The first month, everything went wrong," Andrea said with a laugh. "The heater, A/C, fryer and the fridge all went out. It took $25,000 out of pocket just to keep the restaurant going."

More from iCONIC:
They're still in college but already thinking about YouTube as a full-time job
Despite Amazon effect, here's how mom and pops are thriving on Main St.
10 influential business experts you should be following on Twitter

Luckily, it's a family affair down in San Antonio. Though they have a few full-time employees, the sisters get a lot of help from their mom, aunt, cousins and Jessica's husband, who all contribute where they can. It can sometimes be difficult to manage employees who are older than them, the sisters admit, recalling one especially unnerving experience with a rambunctious delivery driver. But that's why they're thankful to have such a great support system.

The value of next-gen franchisees

Prior to the Perez sisters purchasing the San Antonio Wing Zone, the location had been struggling to stay afloat, with the previous owner having to pay employees out of pocket toward the end. Wing Zone corporate was hesitant to hand the embattled franchise over to "a couple of kids" with no experience. Jessica was the manager at a local sushi place, but that was nothing like owning a restaurant, they said.

So, along with their father, the Perez sisters flew to Atlanta to meet and persuade the team. For a week they took classes at Wing Zone University, an immersive program that taught the girls how to perform duties at every level of the restaurant — from system operator to manager to delivery driver. At the end of the week, they were tested, then sent back to San Antonio for a trial period. It was only then, after Andrea and Jessica proved they were fully capable of running the place, that Wing Zone agreed to sell them the restaurant.

The franchise business model is a proven system that's been transforming and scaling young concepts for years, but millennials are just now realizing that it's not solely reserved for big, established brands.
David McKinnon
chairman of the NextGen in Franchising Committee

The franchise industry has plenty to gain from cultivating young entrepreneurs. Understanding how to use a company's proprietary systems — which include marketing, computer and software, and inventory management systems — is key to managing a successful franchise. And with millennials coming to age as the first "digitally native" generation, there is perhaps no segment better equipped to take over the industry.

NextGen in Franchising is a program that has recognized the inherent value millennials can provide, giving young people the opportunities and guidance to scale their own businesses through franchising. Each year, it accepts 20 entrepreneurs between the ages of 21 and 35 for the NextGen Global Competition. Since its inception in 2015, the competition has received more than 1,000 applicants across 50 countries, which chairman David McKinnon calls "a true testament to this generation's newfound interest in franchising as a viable business opportunity."

Dylan Patel and the Perez sisters are just three of the growing number of millennials who have already bought into the idea of franchising. Andrea and Jessica view their franchise as a launching pad that will open doors to other opportunities, whether it's expanding to more locations, opening a new restaurant or even buying a food truck.

"Whatever it is that you want to do, try to get insight from someone who has already done it," Andrea said when asked about her best advice for aspiring franchisees. "And don't give up, because the best thing you can do is just go for it. Have faith."

By Zachary Basu, special to CNBC.com