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Franchising: A Popular Fit for Veterans

by Heidi L. Russell, Contributing Editor

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Article sponsored by URS

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You want to buy a franchise, but the franchise fees and start-up costs seem insurmountable.


Don’t get that deer-in-the-headlights look just yet. Not only is it doable, but you may also be surprised that a franchise lifestyle closely mirrors your military experience and skills.

That’s what retired Army Master Sgt. Larry Colley discovered this year, when he decided to take the plunge with Aire Serv, a subsidiary of The Dwyer Group Inc. The 170-unit global franchise organization provides installation, maintenance and repair of heating, ventilation, air conditioning, and indoor air quality systems.

military experience and skillsColley, of Riverview, Fla., launched his franchise in May, but before that, he needed $42,000 to cover franchise fees. As for equipment, he didn’t have a van or even a phone system to get up and running.

It took all of two months to get things in motion. Colley became The Dwyer Group’s first-ever participant in its “Boost a Hero” program, which takes a “crowd funding” approach. Crowd funding is just like it sounds - send out a plea to anyone in your circle for financial support. Colley personally raised $3,700, and the rest came from other sources.

“It may have taken all my savings, but we had it, and I had good enough credit to withstand credit cards being maxed out for a while. I had no credit balance whatsoever before we started. We knew that we could do it, and the donations from strangers through “Boost a Hero” helped, too,” Colley says.

A growing option

Franchising is fast becoming a popular option among transitioning soldiers, with 66,000 veteran-owned franchises in the United States, says Beth Solomon, Vice President of Strategic Initiatives and Industry Relations for the International Franchise Association (IFA) in Washington, D.C.

Veterans find that the structure of a franchise operation is not so very different from their military experience and skills, Solomon says. “These are leaders, trained to follow rules. And, franchising is the same: Here’s the system. Follow it, and this is exactly what it takes to be successful. We’re not asking you to invent something new. It comes from executing on a detailed plan very well,” she says. “The consistency of the product makes it successful, and that fits very well with the personality of the veterans. Military experience and skills learned have a natural application in franchising.”

Last November, the IFA launched “Operation Enduring Opportunity” in response to the President’s call for industries “to step forward to find opportunities for veterans in the civilian economy,” Solomon says. The association set a 2014 goal to recruit 75,000 veterans and spouses as franchisees and franchise employees, plus 5,000 wounded warriors. Additionally, 2,100 veterans have joined franchises as employees. Franchise corporations have established programs to help veterans get started. Some, like Domino’s, allow people to start as an employee and eventually become a business owner. And 468 IFA members, like those in The Dwyer Group, participate in the IFA’s “Vet Fran” Program (www.vetfran.com), offering financial incentives, training and mentoring to veterans.

Dina Dwyer-Owens is chairwoman and CEO of The Dwyer Group and also was 2010 chair of the IFA. Dwyer has seven franchising brands, with initial franchise fees averaging $35,000. With a Vet Fran discount, fees drop about $5,000 to $30,000, she says. Dwyer will finance up to 80 percent of the cost. People should also figure in equipment costs, which can run up to $150,000. Although Dwyer doesn’t finance the equipment, it has a leasing program.

That said, Dwyer-Owens cautions people not to worry about the money. “Get clarity about what business you want, then set a goal to be a franchisee. I would suggest, don’t be overwhelmed. First explore what’s available and who is offering the best deal. Then understand, ‘What are my initial costs?’ Then explore funding. There are ways you can go, like a 401(k) rollover or IRA rollover to finance what you need - and the newest ways, like ‘Boost a Hero’,” she says.

Strategy: deploy multiple funding sources

David Nilssen is CEO of Guidant Financial Group. “The financing environment is a difficult one, even more so for our servicemen coming back from war,” he says. “They have unique challenges. Some don’t have perfect credit. There are gaps in their financial profile, because they’ve been away and not tending to those things.” An advisor can offer guidance on tapping a myriad of funding sources. Guidant funds about 200 businesses in a given month, and 12 percent of the company’s clients are veterans, Nilssen says.

Fifty-five percent of Guidant’s clients deploy multiple options at any given time. “It happens more often than not, because financing is not easy to obtain today,” Nilssen says. What are some of those options? The Small Business Administration has many different programs, most of which are under the 7(a) Loan Program. But Nilssen doesn’t recommend going there, “because those programs only provide guarantees to banks to make it more attractive for them to lend to you.”

Instead, talk to someone to create an outline and analysis of your financial profile. From that, you can look at unsecured credit or conventional lending options, equipment leasing or peer-to-peer lending (like the “Boost a Hero” program).

“There is funding available, but think about it earlier in the process, not later. You may have to work a little harder to access credit. The more time you provide us, the more likely we can help you when the time is right,” Nilssen says.

Freelancer Heidi Russell Rafferty is a reporter with 19 years of experience who writes about employment and business issues.

 

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