Running Start

There's no easy button for starting a franchise, but there are dozens of programs to lend a helping hand.

Buying a franchise is often touted as the easier path to business ownership. But the road to becoming an entrepreneur will never be risk-free. There's no such thing as a free lunch, and even buying a franchise requires some kind of seed capital. In addition, making the transition from employee to franchisee--and more important, going from having a secure paycheck to none at all--can be daunting. Finally, acquiring the business knowledge necessary to get up and running takes time, even if the franchisor provides training.

But don't let the obstacles turn you away. Franchisors are offering a variety of programs that are specifically designed to help you over the hurdles and give you a leg up on franchise ownership. So if you're a veteran, a minority or just someone looking for a break, read on. You might be surprised by what we've uncovered.

VetFran
You won't have to look far to find a franchise that's participating in the Veterans Transition Franchise Initiative (known as VetFran). Launched by the International Franchise Association after the Gulf War, the program was designed to ease veterans' entry into business owner-ship by offering them some form of financial assistance. "Some systems may reduce the initial franchise fee, some systems may decide not to assess a training fee, some systems may provide temporary initial adjustment on the royalty payment," explains Matt Shay, president of the IFA. Now, with nearly 1,000 franchises launched by veterans and franchisors eager to get involved, VetFran is accomplishing exactly what it set out to do.

"The opportunity to give a veteran not just a unique business opportunity, but a bit of a kick-start into a new business is something we think is a great idea," says James Alisch, director of franchise development for 1-800-Got-Junk?, a full-service junk removal franchise that has participated in VetFran for more than two years. The program is working out well for 1-800-Got-Junk?--it has already brought nine qualified franchisees to the table. Says Alisch, "[Veterans] have experience, a fairly strong track record of dedication and integrity, and the ability to commit to delivering what they say they will."

Among these franchisees are Jeff Drawe, 31, and Mike Stoll, 37. Both helicopter pilots, they met while they were deployed in Iraq in 2004. While they were in Dubai later that year, the pair discussed their mutual dream of opening a business. Together, they purchased seven 1-800-Got-Junk? territories, which secured them half the city of Jacksonville, Florida, last August.

The friends were granted an initial franchise fee reduction through a process that Drawe describes as seamless. "Once we were offered the franchise, the price reduction--which amounted to almost $12,000 based on the number of territories we had--was already included in our franchise price," he says.

Drawe credits the VetFran program with giving veterans the confidence to pave their own paths after leaving the military. "A lot of people are very scared of leaving that structure, that steady paycheck, that job security," he says. "Thank God VetFran is there, because it helps lure those budding entrepreneurs with financial benefits."

Neither Drawe nor Stoll is quite yet retired from the military. Drawe leaves the service in March of next year, and Stoll still has more than four years left, but they have grand plans for the future, which is sure to involve many more business ventures. "We've set up a series of goals for ourselves," says Stoll. "Our short-term goal is to be the No. 1 franchise within a year of opening."

If a junk removal service doesn't appeal to you, almost 300 other franchises stand ready to offer assistance to veterans. You can find a complete listing of VetFran participants at the IFA's website, franchise.org.

Programs for Minorities
Veterans aren't the only ones benefiting from special programs. Historically, minorities have had a difficult time gaining access to capital and are therefore the main focus of some franchisors' recruitment efforts. In January 2006, Domino's Pizza introduced a new program, Delivering the Dream, designed to help its existing minority general managers become franchisees. "Over our 46-year history, our model has been an internally franchised model, and our whole [goal] is to [help] great people in our system become franchisees," says Mike Mettler, director of franchise recruitment and sales for Domino's Pizza. "One of the biggest hurdles [for franchisees] is the financial hurdle, so to improve that model and continue to support and develop diverse franchisees, we launched the Delivering the Dream program."

The pizza franchise has reserved up to $1 million for the program and caps each award at $250,000. While the support is typically in the form of a loan guarantee, a candidate can also receive grants. Domino's Pizza distributed three awards last year, and at press time it was on track to meet its 2007 goal of five.

Jessy Watson started out with Domino's Pizza in 1999, delivering pizzas part time. He worked his way up to general manager, and in 2005 he purchased his first store in La Grande, Oregon, with co-owners, Dennis Poe Jr., 30, and Rebecca Johnston, 53. A year later, Watson, who is black, received a $180,000 loan guarantee through the Delivering the Dream program and was able to open a second Oregon location. Having a big name backing him made all the difference. It took approximately eight months of major hassle and stress before he could secure the money to purchase the first store. The second time around, Watson started building a new store in June 2006 and had it open by September of the same year. Says Watson, "To be honest, [GE Capital] funded me much quicker just because they knew I had a loan guarantee." Watson, 36, projects combined 2008 sales for his two stores to reach between $800,000 and $1 million, and he dreams of owning at least 20 stores one day.

Watson believes the Delivering the Dream program offers many who are still Domino's Pizza general managers a light at the end of the tunnel. "[It] gives some people a real opportunity to reach for their dreams and strive for something better," he says. "It's a matter of Domino's reaching out and saying, 'We actually care; we want to see you do better; we want to see you obtain your goals, because if you can achieve your goals, that's helping us achieve ours.'"

In other efforts, Focus Brands, the franchisor and operator of Carvel, Cinnabon, Moe's Southwest Grill and Schlotzsky's, recently implemented its Growth Through Diversity program in an effort to make the company's constituent base of franchisees mirror its diverse clientele. Focus Brands offers minority franchisees a $10,000 discount on the franchise fee, a reimbursement of $10,000 once the store opens and an additional $10,000 reimbursement after the first year, as long as development milestones, operational standards and marketing expenditure requirements are met. It's currently perfecting the program in the Atlanta market and is finalizing a deal with its first Growth Through Diversity franchisee.

Both Domino's Pizza and Focus Brands are members of MinorityFran. Similar to the VetFran program, MinorityFran is also an IFA initiative that is focused on recruiting minorities and providing them with support and assistance. While MinorityFran franchises are not required to offer any kind of financial assistance, some of them do. The program currently has more than 200 members.

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This article was originally published in the January 2008 print edition of Entrepreneur with the headline: Running Start.

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