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Multiple Choice

Many try to ENLIST veterans—here’s HOW to WIN


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Veterans & Franchising

Advice from veterans who are already franchisees can help the selection process.

More than 4,300 military veterans have signed as franchisees in the past 18 months alone. But the road can be hard, as newcomers and old-timers explain. Here are tips from the trenches.

Consider the military veteran, newly home from Iraq or Afghanistan, who decides to check into franchising. A tower of options awaits: More than 560 franchise systems are members of VetFran, the International Franchise Association-backed initiative, each offering an attractive incentive to service members honorably discharged.

Ten percent off the franchise fee. Make that 20 percent. Or 50! Four months with no royalty payments. Or six! How about a free franchise to five lucky contest winners? Step right this way for a Patriot Express loan. We’ll expedite it! And for those who lack equity, there’s a non-profit private equity fund for that.

The effort is noble, and the franchisors, suppliers and vendors who participate seem sincere in their wish to honor the service of America’s fighting men and women. To a person, they recite some version of this statement: Military people are perfectly suited to franchising because they have well-honed leadership skills, often far beyond their years, yet they are used to following the rules. 

But is that statement true just because everyone says it? Is the financial performance of franchises owned by military veterans better than average? The truth is, no one can say because there isn’t any data collected—although the chair of VetFran’s board says trying to answer those very questions is a new focus for research.

Until then we present a series of anecdotes that tell a more nuanced tale about veterans and franchising. The truth is, slogging through six months to a year before drawing a paycheck stinks—and that will likely be the case for most new entrepreneurs, whether they have a military background or not.

The money scraped together to build out a franchise will almost always fall short, even if a veteran’s discount reduced the total. That happened to a CMIT Solutions franchisee who thought he was set until he landed his first big contract—for $22,000 worth of hardware, which he had to cover long before invoicing for the job.

And if the owner is conducting a phone interview at a pet care franchise and the dogs start barking like crazy—well, the boss is the only one around to calm them down. Most new franchisees strive to keep payroll costs to a minimum, and the lack of staff may be unsettling to veterans used to well-trained and well-defined teams supporting every mission.

These francishees, both new and experienced but all military veterans, tell it like it is. In so doing they instruct not only veterans considering franchising, but also franchisors eager to sign them on, successfully. Consider it one more instance of serving the public, which all agree these veterans were born to do.

Starting is ‘big struggle,’ but planning can help, Dogtopia operator says

Henry! Henry!” a Dogtopia franchisee calls out after excusing herself from the phone amid a cacophony of barking. “Henry for daycare. Henry for daycare.” 

On this day in spring 2013, three years after opening in Charlotte, North Carolina, Nicole Odom actually has staff members who can handle the customer’s dog and she returns to the phone interview. 

Nicole Odom of Dogtopia

Dogtopia’s Nicole Odom advises planning.

Only recently did her operation become successful enough to cover higher payroll. “It was a very big struggle to start, for sure,” Odom says. “We are now in a great place.” So far in 2013 the operation has grown 34 percent in revenue from the same period a year ago. 

Before that, hers was a grueling schedule as she’d cover most shifts. “It’s exhausting, the first year. We’re here from 6:30 a.m. to 9 p.m. seven days a week,” she recalls. “It kept my payroll down, but it drove me insane.”

Odom’s main advice for prospective franchisees: Figure your own salary into the first year’s operating budget, something she neglected to do because she was more focused on the $300,000 she had in hand to get the business open. She borrowed from her parents for the franchise fee, which was $31,500, a 10 percent discount offered by the franchisor to veterans.

A U.S. Navy veteran who once deployed to the Persian Gulf on the U.S.S. Kitty Hawk, Odom after discharge went to work for a defense contractor in Washington, D.C., which was owned by employees through an ESOP. The company was acquired, the employee stock ownership plan was bought out, and she was the rare young military veteran with a nest egg.

But because of strict rules regarding oversight of ESOPs, she didn’t get her money for two years—an agonizing period from becoming a franchisee in 2007, to getting the money in July of 2009, to opening on March 20, 2010. “It was a very slow start,” she says, and nothing very good happened in the meantime. “We had two more competitors open in our area. This small thing called the recession hit. And I was only using my ESOP funds, so I had very little working capital,” she says. 

If she had to do it over, she’d also seek out a business partner with skills different from hers, to share the financial burden as well as manage the workload. That would have helped her get out and market the business rather than staying in to handle the dogs—an absolute must, she believes. 

Odom got a glimpse of her future career when she traveled to New Orleans after Hurricane Katrina hit in 2005, to volunteer to help displaced pets. “It was awful and hot and terrible conditions and I loved every second of it,” she says. On the long drive back to D.C., she decided she would one day work with animals full-time. After her company’s acquisition, “I decided I was done with cubicles and 9 to 5 and high heels,” she says.

With the initial hardships of being an entrepreneur behind her, she is looking forward to perhaps additional locations for Dogtopia and a regional role. “I loved being in the Navy, and I loved being a government contractor, and I will always, always be thankful for my time in service and proud to be a veteran,” she says. But now is special.

“For the first time in my life I can’t imagine doing anything else,” Odom says.

‘Huge’ gift allows CMIT owner to realize dream, stay close to his kids

In the months before his retirement from the U.S. Air Force last year, Patrick Kelly was soul-searching. He wanted to run his own business, and he wanted to stay close to his 8- and 10-year-old kids—no commuting to Washington for him for a defense contractor job, even though his peers were getting offers to do just that for $150,000 a year. 

“I did a five-mile circle around our house,” as the radius where he wanted to locate a business. “I looked at food, retail, 7-Eleven. I was searching online and saw CMIT Solutions,” he recalls, a franchise that offers information technology services to companies. “I’ve done all this. I’ve run a help desk. I’ve had a hundred IT troops around the base. I think it was a natural,” he says. “It’s a continuation of my career, rather than a big change in my career.”

Near the end of the discovery process, he got a call from CEO Jeff Connally. It seems a man named Andrew Twynham had signed a franchise agreement but after a time Siemens had lured him away with the offer of a corporate job. “Andrew has a great offer here,” Connally told an incredulous Kelly. “He spun off his business to a franchisee in Atlanta, and he wants to offer you his franchise territory and we’ll move it to Virginia Beach for you.”

Kelly was speechless. “I stood there on the phone for a while, and tried to figure out what to say. It was a great gift. It was huge,” he says, valued at about $70,000. He paid an $8,000 transfer fee. The franchisor was flexible in waiting for his retirement date. “Andrew said he had heard of other people doing similar gestures for returning military, and he was waiting for a veteran to come along. I guess I was in the right place at the right time.”

There’s still plenty of struggle to get to positive cash flow, though. He got a checking account from a bank, and they offered a credit card with a $15,000 limit. “Then my first deal in December was for $22,000 in hardware. So $15,000 wasn’t going to cut it.” He applied to get a loan through the SBA, something he had resisted before.

“I’ve heard every bit of advice, that it takes forever to get and they hold all your assets hostage, your house and everything. My experience was literally it took two and a half weeks, and I put $50,000 in as collateral” for a $100,000 loan.

He recommends training, as much as possible, for any retiring veteran. His biggest lesson learned? “Network, network, network. So the first four months I handed out over 2,000 business cards. And I’m going full bore, at every event I can do. I try to get in front of at least 100 people a week to give my one-minute speech,” he says, adding all the training in the world still falls short.

“It’s one thing to talk about it and dream it,” he says about owning a business, “and it’s another thing to do it. I did invest in another person, and so far six months without a paycheck—it’s a little nerve-wracking.”

‘Meet the Family’ Day was clincher for Valpak ‘zee, who lauds extra support

After 20 years in the military or contracting for the government, Mike Lambert was ready to settle with his wife in West Texas. A friend and fellow U.S. Marine Corps veteran owned a Valpak franchise, among the top performers in the network, and encouraged him to check it out. 

The Lubbock, Texas, territory was dormant. “So I thought, man, this was perfect,” and he liked what he saw when visiting franchisor headquarters in Tampa. “They have a Meet the Family Day, which really went a long way for me,” Lambert says. 

“When you’re in the military there’s a lot of support you get as a result of that structure,” Lambert says, and he advises other veterans to look for a franchisor that follows through on promises of support. 

“They treat their franchise owners like family” at Valpak, he says. “When I went down there you could just see it.”

Valpak competes for advertising dollars from businesses, mailing envelopes full of offers directly to up to 80,000 homes, in a small market like Lambert’s. A big New Jersey market like his Marine Corps pal’s might mail to hundreds of thousands of customers, and have office staff and several sales reps. 

He’s on his own for now, and likes it that way.

“It’s a lot of hard work, but compared to where I came from it doesn’t seem like work at all, because I’m doing exactly what I want to do,” Lambert says.  

Research led to Russo’s, and founder’s attention sealed deal for Hawaiian

Robert Carlisle is used to cooking for the masses, with a background in military food service for the U.S. Army’s Airborne Rangers. “I was cooking for quantity not quality. I would cook for 3,000 people at a time. You’d go into muscle failure,” he recalls.

“Now I want to try the other side of things,” he says, that is, turn out high-quality dishes as the first Hawaiian franchisee for Russo’s Coal-Fired Italian Kitchen. Although the numbers won’t match his Army days, he believes he’ll find plenty of customers.

In Hawaii with his wife since 2007, in the beverage sales business, he’s been scouting for opportunities. “It’s kind of lopsided,” he explains about the island’s population. “You have Waikiki and Honolulu, where most of the population is. But on the west side of the island, I’m in an area where it’s fast developing. This side of the island is going to be like Waikiki.”

His lease is almost completed. He has applied for a $500,000 Patriot Express loan, which is backed by the Small Business Administration and is expedited for military veterans. He’s personally injecting $100,000 in savings into the deal, and his landlord is putting in $125,000, in the form of tenant improvements on the location. He hopes to open by late summer or fall.

“Russo’s website was the best,” Carlisle says, and he emphasizes that researching all the possibilities is key, as is learning everything you can about the market. Incentives for veterans are nice, he says, but more important is personal attention by the franchisor. Russo’s offers a $10,000 discount on the franchise fee, which is $49,000 for a Russo’s Coal-Fired Italian Kitchen. 

Personal phone calls and visits from  President Anthony Russo sealed the deal. “Absolutely, that’s one of the reasons why I kept moving forward. I had other franchises in mind, and it would take a couple of weeks for them to get back to me,” Carlisle says.

“Definitely look at the benefits and discounts and compare them with other franchises. I never had my own business, and from day one he walked me through every step,” Carlisle says, referring to Russo. “He didn’t do my business plan for me, but if I asked him how much will this cost, he’d tell me exactly. 

“I also hired a consultant,” Carlisle says. I wanted to get a second opinion. I think it’s worth the money to pay for an adviser.” He recommends the SBA’s website as a good resource, as well as BoeFly, the matchmaking service between borrowers and lenders. BoeFly walked him through his application, and afterward the banker that had originally rejected his application made the loan.

“I walked away from a job where I was getting close to six digits a year. So it’s a big risk,” he says. But he believes he’s ready for the battle. “Ever since I left the military I still feel like I’m in the military. I just feel like I’m going to another duty assignment. I don’t let the dark side of business get me down. I just keep pushing through.”

Children’s Lighthouse owner urges veterans to reach out for help

“If I hadn’t had that military background I don’t think I’d be as adventuresome,” says Steve Welch, who is building a 10,000-square-foot Children’s Lighthouse preschool education and daycare center in Austin, with plans to open in July or August. “This is my first venture into a franchise.”

But it’s far from his first leadership role. A former Special Forces attorney for the U.S. Army, he’s used to completing whatever mission he is assigned. “When you get your orders from a colonel, and they say, ‘Go do this and don’t come back until it’s done,’ you get serious really fast,” he says. 

He recalls his experiences as a young captain deploying to Egypt or Sudan or Greece or Germany, in that last instance to defend a Special Forces medic/demolitions expert who got in trouble with local law enforcement. Once service members get their basic training, “all those experiences prepare you for what an entrepreneur has to do.”

He says he had no experience with preschool education, but he’s tackling it like any challenge by asking for help from the franchisor and from other contacts. He received a $25,000 discount on the franchise fee, which he calls “very, very nice.” 

The discount wasn’t the reason he chose Children’s Lighthouse. He’ll end up with a loan in excess of $2 million, so one could say $25,000 is chump change. “But it was nice recognition,” he says. “I guess I felt honored by it.”

He urges veterans to get involved in the community. “You just can’t get anywhere in this world without help from somebody,” he says.

Personal interests, skills count the most, Bach to Rock new owner says

Husband-and-wife team Dave Leonard and Ellen Good are the first Bach to Rock franchisees in Pennsylvania, set to open their music education business in July in Wayne. A U.S. Army veteran who served in South Korea in 1966-67, Leonard then spent 20 years as a consultant, doing market research and strategy development for restaurant chains.

But when it came time to buy a franchise, he didn’t consider a restaurant. “After that amount of time you do feel that you’re seeing the same movie, over and over again,” Leonard says. “I think I had done it so long and for so many companies, I was losing interest.”

Bach to Rock's Dave Leonard

Bach to Rock's Dave Leonard: Passion is key.

A concert by the grandkids inspired him to think about Bach to Rock, which teaches music lessons from classical to rock, emphasizes group performance, and fills a void left by schools cutting back on music education. 

Bach to Rock’s veteran discount helped as well, a 50 percent waiver of the franchise and license fee, which works out to about $20,000. And they defer royalties for six months, “which is helpful when you’re starting up,” he says. 

Leonard believes veterans “who are in the middle” should consider franchise ownership—that is, those who aren’t rabid entrepreneurs who could only be happy pursuing their own idea, or those who just want a job. “A franchise fills a very nice gap.”

He’s using his background in restaurant consulting, in site selection and permitting. Plus his career focus on understanding the target audience is something every franchisee should follow. “Who are the folks who would really take advantage” of what the franchise offers, is the question to answer.

His wife is learning to play the harp, and was a bass player and piano player in high school. Leonard dabbles in the guitar. They both like the social aspect of Bach to Rock, culminating in battles of the bands where students can write their own material and compete as a group. “We were in D.C. in January and they had 50 bands come in, and the kids were terrific,” Leonard says. “I was stunned.”

Leonard notes the many programs available to veterans, including incentives by franchisors, but he believes anyone considering franchising should assess their interests. “They’re going to have to inventory what it is they like to do when they get up in the morning,” he says. 


Caliper: Military service alone not enough to predict perfect franchisee

“The whole hiring process is screwed up by the fact we pay attention to what a person has done, and virtually no attention to what somebody is.” So declares Herb Greenberg, CEO and founder of Caliper Corp., and he believes the axiom applies to signing franchisees, too. 

Caliper is a Princeton, New Jersey-based human resources consulting firm that offers a free assessment of prospective franchisees to any franchisor that is a member of VetFran. Few franchisors have taken him up on the offer, he says, many preferring to consider military service alone as a qualifier.

That’s a mistake, he believes, because a military person is “no more or less likely” to be a successful franchisee than a civilian. “People say, they can give orders and take orders. Big deal,” Greenberg says. Attitude is more important than skills, by a mile.

Caliper asks a series of 150 questions, grouped together in fours, and respondents are asked to check which they are most likely and least likely to agree with. Here’s a sample: “I’m a good leader. I get along well with people. I’m emotionally stable. I’m a responsible person.” 

“Over 150 items, a person paints a picture. It gives you a snapshot picture of what that person is all about,” he says. “It’s scarily accurate.” 

Franchisors should consider that if they sign the right type of person, they can teach the skills—but not the other way around. “Let’s look at what somebody is first, and then concern ourselves with what they’ve done,” he says.


Enlisting Veterans by the numbers

The numbers are in: 4,314 military veterans and spouses have signed as franchise business owners using discounts offered by VetFran member companies, since the White House-led Joining Forces initiative was launched in November 2011, according to the International Franchise Association.

Just under 61,000 veterans have been hired as employees by franchised companies, in the same period. The goal by 2014 is to hire or sign 80,000 veterans and military spouses as employees or owners.

VetFran is a 20-year-old strategic initiative backed by the International Franchise Association, and part of the first private-sector commitment to the effort to get military veterans, especially those returning from Iraq and Afghanistan, back to work. 

With more than 560 franchisors as members of VetFran, the committee is working to write a new strategic plan to better help veterans select from a “firehose” of options, as the VetFran committee chair calls it, and to research the performance of veterans signed as franchisees. 

“It’s very important to me and the 200,000 vets retiring over the next five years that we help them, and that we leverage the strength of our association and of our industry,” says Joe Lindenmayer, VetFran committee chair and president of TSS Photography. 

Lindenmayer has been with TSS for 20 years, and is a military veteran himself. “They’re the only company that would take an untalented 23-year-old out of the desert,” he says about TSS.

 

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