Would You Buy a Franchise From Someone Who's Been to Prison?

By Tam Goldsmith

After prison, John Rusnak became a franchise owner. Should franchising offer more people a second chance, or are the risks too great?

When John Rusnak left prison in 2009, he faced the prospect of rebuilding his working life with a criminal conviction that would be difficult to explain to any prospective employer or business partner. He had once worked in banking, but his involvement in concealing enormous trading losses at Allfirst Financial had ended in prosecution, imprisonment and the destruction of his professional reputation.

A few years later, he was running ZIPS Dry Cleaners franchises in Maryland. It was a considerable change of direction, and an unusual second career for someone whose offence had involved financial dishonesty.

Franchisors have good reasons to be cautious about the people they allow to operate their businesses. A franchisee may handle substantial amounts of money, employ dozens of people and make decisions that affect the reputation of a brand across an entire market. Customers generally do not distinguish between a business owned by the franchisor and one operated by an independent franchisee.

Rusnak's experience nevertheless raises a difficult question. If someone has served a prison sentence and subsequently demonstrated that they can run a legitimate business, should their conviction permanently prevent them from becoming a franchise owner?

Starting Again After Prison

Rusnak was sentenced in 2003 following the concealment of trading losses at Allfirst Financial. After his release in 2009, he entered the dry-cleaning business through ZIPS. In a 2014 interview, he discussed operating several locations and his interest in giving employment opportunities to people who had experienced prison or rehabilitation themselves.

His circumstances were unusual, particularly because the offence involved financial misconduct. A franchisor considering such an applicant would reasonably want to understand what had happened, how the person had conducted themselves since and whether they could be trusted with the financial responsibilities of ownership.

That assessment would be different for someone convicted of an offence involving children who wanted to operate a childcare franchise, or someone whose criminal record prevented them from obtaining a licence required for a particular business. In some cases, legal restrictions or safeguarding concerns would make the decision straightforward.

Other applications would require more judgement. A conviction from many years earlier may have little connection to the work involved in operating a cleaning business, restaurant or home-maintenance service. An applicant may also have spent years building a successful employment record, supervising staff and demonstrating financial responsibility.

A franchisor needs to know whether that person can run the business properly today. Their history is relevant, but so is the evidence of what they have done since.

Buying a Business Is Hard Enough Without a Conviction

Most prospective franchisees have to overcome significant financial hurdles. They need savings or access to borrowing, and they may have to pay an initial franchise fee, fit out premises, purchase equipment and cover operating expenses before the business produces enough income to support them.

For someone who has been in prison, those hurdles can be even greater. They may have struggled to find employment after release, lost years of earning potential or been unable to build the financial history that lenders expect. A landlord or finance provider may also carry out background checks before agreeing to a lease or loan.

Franchising can offer training, established operating procedures and support from people who understand the business. Those advantages may be particularly useful to someone entering an unfamiliar industry. They do not, however, replace the need for adequate capital or make a financially weak investment sensible.

There is a danger in presenting business ownership as a simple answer to the difficulties people face after prison. A franchisee who takes on too much debt or underestimates the demands of running a business can end up in a worse financial position than when they started.

For some applicants, a better route would begin with a job in an existing franchise. They could learn the operation, take on supervisory responsibilities and eventually manage a location before considering ownership. The franchisor would have an opportunity to judge their performance over time, while the employee could decide whether the financial risks of becoming an owner were worth taking.

Some Franchise Operators Are Already Giving People a Chance

There are businesses that have made a deliberate effort to employ people with criminal records.

In Los Angeles, Homeboy Industries has spent decades helping formerly incarcerated and previously gang-involved people return to work. Founded by Father Greg Boyle, the organisation operates businesses including a bakery, café and catering service, giving participants practical employment experience alongside wider support.

Homeboy is a nonprofit operating social enterprises rather than a conventional franchise network. Its experience is relevant because it shows how access to work, training and consistent expectations can help people rebuild their lives.

Franchise operators have also been involved. Zane Tankel, a former Applebee's franchise operator, became known for employing people with criminal records in his restaurants. His approach recognised that people who had difficulty securing employment elsewhere could still become useful, reliable members of a restaurant team.

Employing someone is clearly different from allowing them to purchase and operate a franchise. An employee works within an established management structure, while a franchisee assumes responsibility for an entire business and may have borrowed heavily to acquire it.

Even so, an employee who has worked successfully for several years, earned promotion and demonstrated sound judgement may be a more convincing ownership candidate than an applicant who arrives with money but little experience. Franchisors regularly assess management ability when selecting owners. There is no obvious reason why a demonstrated record of good management should cease to matter because someone has a conviction in their past.

The Franchisor Has Responsibilities Too

It would be irresponsible to suggest that every former prisoner should be eligible to buy any franchise. Some offences create risks that cannot be managed through training or supervision, and certain industries have legal requirements that restrict who may own or operate a business.

Franchisors must protect customers, employees and existing franchisees. A serious incident involving one operator can damage confidence in other businesses trading under the same name. Those concerns deserve careful consideration, particularly in businesses involving children, vulnerable adults, financial services or access to customers' homes.

Where the law permits discretion, however, recruitment decisions should be based on the offence, the responsibilities of the proposed business and the applicant's conduct since conviction. That is a more useful assessment than treating every criminal record as evidence of the same risk.

Rusnak's move into franchising does not prove that second-chance ownership is suitable for everyone. It does demonstrate that a person with a serious conviction can sometimes find a route back into business ownership.

For an industry that has long promoted the opportunity to build a business through an established system, the question is worth considering. Franchising may be able to offer some people a second chance, provided the opportunity is earned, properly financed and subject to the same demanding standards expected of every other owner.

What We Can Learn From This

Franchisors should review whether their recruitment policies distinguish between convictions that create genuine operational or safeguarding risks and those that may have little bearing on an applicant's ability to run the business. A route through employment and management could allow suitable candidates to establish a record of reliable performance before investing in ownership. Any eventual franchise sale must still meet normal requirements for finance, licensing, training and customer protection. With careful assessment, franchising could give capable people who have rebuilt their lives an opportunity that might otherwise remain closed to them.

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