Are you cut out to own a franchise?
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Roger Gauert and Jeff Olson own two completely different types of business franchises: Gauert has two Sport Clips - hair-cutting franchises in Maryland. Olson has one Papa Murphy’s - a take-and-bake pizza franchise in Wisconsin. But, both have one thing in common: Each chose veteran-friendly corporations to launch their businesses, through the VetFran® program offered by the International Franchise Association (IFA). VetFran helps returning service members access franchise opportunities through training, financial assistance and industry support.
When all is said and done, veterans taking care of veterans makes all the difference to a fledgling business, Gauert and Olson say. Not only that, they observe that the military’s leadership culture also lends to workplace climates that in turn lead to franchise success. Gauert’s business was so successful after he opened in 2012 that he launched a second store in 2013, and Olson is also experiencing strong gains in his operation, which he opened just this January.
In the military, we take care of the people we work with and the people who work for us. When you do that in a business, those people take care of you,” says Gauert, who initially served as a Marine and later became an aviator in the Air Force for 17 years. “Yesterday we had a Sport Clips’ picnic for our two stores and had a get-together like we would in the Air Force. Not all civilian businesses do it. The camaraderie the military provides sets the tone for how you handle employees. When you do that for employees, it makes a big difference to them.”
Since the IFA launched “Operation Enduring Opportunity” in 2011 to help veterans with the military to franchise ownership transition, more than 4,300 veterans have become new franchise owners, says Joe Lindenmayer, VetFran Committee Chair. Lindenmayer also is a veteran and President/COO of TSS Photography Inc. in Duluth, Ga. He exited the Marines as a corporal in 1996.
Veterans fill one of seven jobs in the franchise field. In total, 56,000 veteran-owned franchises are open nationwide, Lindenmayer says.
Do you have an entrepreneurial bent for franchise ownership? And, if you decide to take the plunge, how do you secure financial support through VetFran and other programs? When can you expect to start seeing success? Here’s a primer from Lindenmayer, Gauert and Olson.
Lead time: Give yourself a minimum of three to six months. If possible, talk to veterans who own franchises one to two years before you exit the military and pursue military to franchise ownership, Lindenmayer says. “If you have a passion, you can learn it, even if you don’t have prior experience,” he says. “Give yourself time to look at the geographic area for your franchise. Stay a few days or for a long weekend. All of these things lead to the right organization: category of franchise, location, service brand.”
Evaluate whether a company is military-friendly by whether it is flexible with your preparation time, Lindenmayer adds. “Some organizations really want people to go through their process in a pre-determined amount of time, and if you’re not ready to go in three months, they put you off. But, a good franchise organization who understands military to franchise ownership knows it’s not possible,” he says.
Evaluate companies: Don’t just stick with Internet research, either. “In some respects, with social media, folks can post negative feedback without having to back it up,” Lindenmayer says. Follow Lindenmayer’s recommended steps to properly evaluate:
1) Look at ratings on the company. Study its website, including what people are posting and any media or publicity surrounding the organization.
2) Visit franchise owners. Ask them how much money can be made and how much training is needed. “Some questions, people aren’t comfortable answering over the phone. Develop a rapport. Make sure it’s not a potential competitor so that you’re asking proprietary or personal questions. The franchisor may have a process where they’ve cleared you to contact existing owners. Always ask them, ‘Would you do it again, if you had it over?’” Lindenmayer says.
3) Continue digging even after contacting three franchise owners. “Call a fourth and try to find something that isn’t as good as you’d like it to be about this franchise,” Lindenmayer says.
Assess your strengths: Ask current colleagues and supervisors if you’re cut out for franchising. “Ask for a 360-degree evaluation from your command officer, people at higher levels, peers and people that may report to you,” Lindenmayer says. “Ask, ‘Would I be good at managing a business?’ People are willing to do that. If you have honest people around you, you will get great feedback.”
Secure funding: “I call it, ‘shopping for money,’” Lindenmayer says. Franchise fees vary, from under $25,000 for home-based businesses all the way up to $4 to $6 million for other franchise concepts, he says. Under the VetFran program, 540 franchise companies have agreed to give their best discount or incentives to veterans.
“For some, it may be a $5,000 discount on the franchise fee; for others, a free franchise fee,” he says. VetFran.com offers a mentorship program, in which military members can register for free with no obligation. The IFA is also in discussions with the VA to set up an educational program to teach veterans about building a business plan and hiring practices, Lindenmayer says.
“Whatever veterans save, that allows them to use those savings towards equity in getting a (Veterans Administration) Patriot Express Loan,” he adds.
In Olson’s case, Papa Murphy’s gives him a break through VetFran on royalty and advertising fees for the first three years that he is an owner. His initial cost was just over $200,000, which included the franchise fee and buildup cost to get the store ready.
Olson took out a small business loan. Olson served 30 years full-time with the Army National Guard in Wisconsin and was a Sgt. 1st Class. He exited in October 2011 and started his Papa Murphy’s business in December 2012. The values of the franchise meshed with his military background.
“They intrigued us, what they stand for. They’re really big on customer service and that’s important, and they emphasize quality, low price and fast, friendly service. We decided that’s what we wanted, and they sold us the market in Sparta,” Olson says.
“Papa Murphy’s has some lending people, and I was able to take my Military First savings plan - my 401(k) - and rolled it over into a self-directed 401(k) and used some of my retirement funds to help offset the startup costs. It worked out really well,” he says.
In Gauert’s case, Sport Clips gave him a $5,000 franchise fee discount. “Any franchise that wants to give you a discount has made a commitment to you. They want you and want to work with you. What it shows, too, is that they’ve had success with veterans. Everything the military does may not work in every instance, but those given VetFran discounts work well in our system,” he says.
Look at what banks and other funding sources can do for you. The Patriot Express can offer interest rates from 2.5 to 5 percent, depending on your credit score, Lindenmayer says. He adds that the bank loan sources have evolved to the favor of the veteran.
“If you’re a veteran and want a loan for a franchise system with a proven track record, you move to the head of the line. These lenders don’t have huge concerns about lending,” he says.
And, what if you haven’t been able to save up during your military service? “Then there are other options and opportunities out there, like crowd funding (small amounts of capital from a large number of individuals),” Lindenmayer says. “There are neat opportunities to get assistance through communities in addition to the loans. The message here is there are a lot of different solutions and not a one-size-fits-all approach to achieving this.”
He also suggests working for a franchise system that caters to veterans if you decide you don’t have the resources to buy one for yourself.
Heidi Lynn Russell writes about employment and business issues.
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