Find Your Franchise
It may just be your best path to business ownership.
by Dan Fazio 

You served your country, but now it’s time to move on with your life. The economy is recovering, but the job market is still tight. You’ve set aside some money during your military career and maybe you’ve thought about starting your own business. But you don’t have an MBA, business experience or a killer idea for a new product or service.

What you do have are the skills the military taught you: leadership, discipline, tenacity, teamwork and the ability to follow a Standard Operating Procedure (SOP). These skills are the perfect foundation for a franchise owner. With franchises, you don’t need an MBA, business experience or a killer idea. Franchises are proven business models that come with directions.

“Military veterans are ideal for this excellent business opportunity,” said Allan Young, an Army veteran who is CEO and co-founder of ShelfGenie, a franchise system that designs, builds, and installs Glide-Out shelves. “They’re disciplined, show attention to detail, know how to assess risk and can execute a strategic plan. They also know how to deal with change and overcome fear and doubt. There’s not a huge difference between a battle plan and small business plan – one is just more dangerous to execute.”

While it’s not for everyone, franchising offers many advantages to those who want to realize the American dream of owning their own business.

“Franchising is unique in the fact that most of the hard work and mistakes have already been made for the entrepreneur,” said Dina Dwyer-Owens, former chairwoman of the International Franchise Association (IFA) and CEO of the Dwyer Group, which owns popular concepts such as Mr. Rooter, Mr. Electric and Glass Doctor. “Most franchises are turnkey operations where everything is set up for the owner from day one to have the business up and running.”

Franchisors Want You
Many franchisors recognize that military veterans make good franchise owners. Nearly 400 franchisors belong to the IFA’s Veterans Transition Franchise Initiative, known as VetFran. A concept pitched by Dwyer-Owens’ father, Don Dwyer, VetFran participants offer incentives to military veterans – often in the form of discounts on franchise fees.

“Franchise companies eagerly seek veterans as potential owners,” said IFA President and CEO Matthew Shay. “Veterans understand the importance of teamwork and constant communications with headquarters. And they know that training, can-do attitudes and mission focus are crucial to any operation. All these are key aspects of successful franchises.”

Options are Endless
Most people think of fast-food restaurants when they think of franchises. The reality is that most Americans use the services or products of a franchise many times a day – from pumping gas to ordering food to getting their plumbing fixed or painting their house. In fact, one out of every three dollars Americans spend is spent with a franchised business, according to the IFA. More than 120 industries operate within the franchising format.

In 2009, Air Force veteran Chad Marshall got laid off from his job at Panasonic. After a couple of months of job searching, he decided to start his own business. His mother’s battle with Alzheimer’s disease inspired him to become a franchise owner with ComForcare Senior Services, a provider of private, non-medical home care services.

“During that time, I saw a big need for quality home care,” Marshall said. “When I was laid off, I decided two things: I didn’t want to work for someone else again and I wanted to provide a service that would help people and society. I looked at several franchisors and chose ComForcare because it offers a veterans’ discount and had the lowest royalty fees.”

Based in California’s San Gabriel Valley, Marshall now employs 30 people. 

Franchising Expected to Grow Slowly
The recovering economy might seem like a lousy time to launch a business. Credit is tight, and franchises weren’t immune from the recession last year: statistics show the number of franchised businesses stayed relatively flat in 2009.

But the outlook is better for this year, according to a study conducted by PricewaterhouseCoopers for the IFA’s Educational Foundation. The report predicts the number of business format franchises will grow 2 percent in 2010, a net gain of nearly 18,000 establishments. About 36,000 jobs will be added this year by franchises.

Franchisors are looking for the natural leaders graduating from arguably the best business school in the world – the U.S. military – to grow their franchise systems. If you have what it takes, now is as good a time as any to take your run at the American dream.

“One piece of advice I have for those getting into business is to be driven,” Marshall said. “Business ownership is the hardest and most rewarding thing you’ll do. You have to really want it. However, your military discipline and focus will help immeasurably.” 

Calculating the Cost
Veterans considering a franchise first need to determine the total cost. 

“Always plan for more expenses than you think you’ll have,” said Betty Otte, management counselor and franchising specialist with the SCORE chapter in Orange County, Calif. “New franchisees are notorious for having very high expectations for their businesses. It may take two to three years before you see a profit and if you don’t plan for that, you may sink before you have a chance to swim.”

The total cost depends on the type of franchise. A restaurant may include the cost to build and equip a store. A home-based business , however, will require little overhead costs. Here are the most common costs:

Franchise Fee
The initial franchise fee can range from several thousand to more than a million dollars. Other costs include operating licenses and insurance. Some franchisors require franchisees to pay a “grand opening” fee to promote the new location. 

Royalty Payments
Franchisors often charge royalties for the right to use the franchisor’s name. These are based on weekly or monthly gross income. Some franchisors require payment even when the franchisee hasn’t earned much income.

Advertising Fees
Some franchisors collect advertising fees to help pay for national advertising or to attract new franchisees. This is on top of any advertising franchisees purchase to market their specific location.

The Franchise Disclosure Document, which the Federal Trade Commission requires franchise sellers provide to perspective buyers at least 10 business days before a contract is signed or money exchanges hands, should contain a complete list of the costs involved to start one of the company’s franchises. But there may be other undisclosed costs. 

Find Your Financing
Some military retirees have accumulated enough money to help fund their franchise endeavor. However, most people will have to find other sources of capital. 

Here are some options:
Traditional Banks: Secure a small business loan through a bank. Banks are more willing to lend money for franchises than start-up businesses. 

Patriot Express Loan: Available exclusively to the military community, the Patriot Express Loan Program is offered through the U.S. Small Business Administration (SBA). The program provides low-interest loans of up to $500,000 and ensures a quick turnaround in the lending process. Lending in the Patriot Express program grew 20 percent from fiscal year 2008 to fiscal year 2009, despite the current credit crisis. For more information, visit www.sba.gov/patriotexpress 

Microloan Program: The SBA also works with micro lenders and community organizations across the nation that offer financing up to $35,000 to small businesses. To find your local SBA office, visit www.sba.gov/localresources/index.html   

Franchisors: Some franchisors offer financing programs to potential franchisees.

Community Development Corporations: These groups may charge a higher interest rate but are often willing to take more risk. 

Private equity lenders: Also referred to as “angel investors,” this may be a last-resort option. “Venture capital money is financing sponsored by folks with capital to invest,” Otte said. “They are looking for a quick turn on their money and usually want sufficient equity in the company as to gain control.”  

Family and friends: Borrowing money from friends or family is one of the simplest and most cost-effective methods.