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Franchising Trends

Franchisers Recruit Military Veterans
October 11, 2005
URL: http://www.entrepreneur.com/article/76804

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Some franchisers are offering discounts to discharged members of the armed forces and find vets eager to show their skills.

For 20 years, Linda and Vaughn Harker got up early every morning, put on their Army uniforms and followed whatever orders came their way. Today they may get up a little later, but they still dress in uniforms and follow procedures. Only these are set out in the operating manual that came with the UPS Store franchise they opened in July in Titusville, Fla.

Linda, 49, and Vaughn, 51, are among the 250 military veterans benefiting from a program that provides discounts on franchise fees to honorably discharged members of the armed services. The program, called the Veterans Transition Franchise Initiative (VetFran), offers discounts of 10% to 25% off the franchise fees of 150 participating franchise systems. According to the International Franchise Association (IFA), which is sponsoring the program, 130 more sales are pending.

Despite the appeal of business ownership and the program's discounts, franchising isn't recommended as an option for all military veterans in transition. Foremost among the drawbacks are the often steep start-up costs, discounts notwithstanding. But those recruited through the program say they've taken well to franchising's regimens.

"Everything's numbered for you, from A to Z, just the way I was taught in my military career," says Mrs. Harker about her UPS store franchise. Mr. Harker adds, "In the military, one of the rules is, 'If the procedure works, use it.' " Such a rule is essential to franchising, too, since most franchisers require strict adherence to their operating formats.

As for the uniforms, Mrs. Harker laughs. "We've gone from wearing Army puke green to UPS beige and black," she says.

Participating franchisers say veterans make good franchisees. While many franchisees think they'll get rich right away, "military people have a very realistic view of life" and the prospect of a tough first year, says JoAnne Shaw, chief executive officer of the Coffee Beanery, a franchise in Flushing, Mich.

"All the planning and organizing skills we were taught as military officers came in handy when my daughter and I prepared to open our coffee shop," says retired Lt. Colonel Keiko Denbeau, 57, who opened a Coffee Beanery franchise in Peoria, Ariz., in November. Her 20-year Army career included a stint at West Point as a finance officer. "In the military, you're also on duty 24/7," she says, "but running a coffee shop is easier."

VetFran is promoted on the IFA's Web site, as well as the sites of the Department of Veterans Affairs and the Small Business Administration. The program has been featured in Military Times Media Group papers, and the information packets all personnel receive when they leave the armed services include VetFran brochures.

Despite this backing, owning a franchise isn't necessarily an advisable choice of second career for veterans. For starters, there's the hefty price tag, even with the program's discount. Start-up costs range from under $10,000 for commercial-cleaning and computer-repair franchises, to $350,000 to $600,000 for a Big O Tires, or other automotive-aftermarket retail business, or a restaurant like a Checkers Drive-in. And to be eligible for the VetFran discount program, applicants must meet the franchiser's net worth, experience and other requirements.

Coffee Beanery discounts its $27,500 franchise fee for veterans by 15%, but total investment can range from $263,000 to $491,500, depending on type of store and location; the royalty is 6% of annual revenues and the ad fee another 2%. Veterans bought three of the 22 franchises the Coffee Beanery sold last year and a fourth cafe is opening soon.

To buy a UPS Store franchise, a veteran would pay a discounted franchise fee of $22,450 and then also make a total investment of $144,000 to $248,000 for a fully stocked new store and pay a royalty of 5% and an ad fee of 3.5% of annual revenues.

Of the 273 new franchises the UPS Store sold last year, 59 were purchased through VetFran, says Debbie Heiser, the company's manager of franchise development. Ms. Heiser says her franchise has an inside track--UPS has franchises on 19 military bases and advertises in service publications.

Regimented Operations

A franchise isn't automatically a good deal just because it participates in VetFran and offers discount, warns Jeff Johnson, founder of FranSurvey, a Lincoln, Neb., company that surveys franchisee satisfaction. "It still must be a business you want to get into, and you must talk to other franchisees to be sure they're excited about what they're doing," he says.

Not all veterans are cut out to be franchisees, says Ron Klusacek, 46, a former chief warrant officer who retired after 26 years with the Army. He and his wife, Shelia, 45, operate a UPS Store in Evans Mills, N.Y., near Fort Drum where he volunteers as an adviser to veterans in transition through the Army Career Alumni Program.

"Certain franchises are so restrictive, all you are is a glorified manager," a position a former officer would find difficult to accept, Mr. Klusacek says. Others, he adds, provide little or no support after you pay the fee and open your doors. After a long military career, "some people may not have the decision-making ability to operate a business on their own," he says. Lastly, he says, "if you're coming out of the military with nothing but a high-school education, I don't think recommending a franchise would be right. You need the math--and should get more education first."

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