John Turner spent 12 years in telecommunications for the Army, and then a few more working in management positions for companies like NEC Global and Cisco. All along, he knew he wanted to eventually be in business for himself.
“I wanted to build my own company, and I knew the communications field the best,” he said. “I realized I could leverage my years of service to get a leg up in the franchise world.”
Turner wished to be part of a reputable company with less chance of failure than a standard start-up would have. So in November, he opened a Wireless Zone franchise near Capitol Hill.
“A good franchiser gives you all the tools you need to be successful, and you add your own hard work, determination and confidence,” he said. “Anyone who has been successful in the military understands that type of system.”
More than one million veterans of the wars in Iraq and Afghanistan will enter the workforce in the next five years. Rather than attempt to elbow their way into the tight job market, some veterans are pursuing franchising because it mimics the rule-based system they grew accustomed to in the military.
“Veterans opening franchises is becoming a popular trend,” said Joe Sharpe, economic director for the American Legion. “It seems like a good fit for them. It’s like starting a business that’s already been set up for you.”
Several new programs aim to entice veterans to the world of franchising. The International Franchise Association runs one called VetFran, which requires that parent companies give veteran franchisees their “best deal” possible — often resulting in thousands of dollars off the initial franchising fee. There are more than 450 companies participating, and at least 2,100 veterans have opened franchises through the program so far
Some companies go even further — the UPS Store recently announced it was giving away free franchises to 10 veterans who qualify. (Five have already been given out.) In February, CiCi’s Pizza announced it will waive the franchise fee and offer a 50 percent cut on royalty fees to all qualified veterans who open CiCi’s franchises and hire a veteran manager.
Nathan Sinclair performed tours in both Iraq and Afghanistan with the Marine Corps, but he intended to start his own company immediately after he returned. He saved up his earnings and began e-mailing with the franchise office of Pita Pit, a favorite fast-food joint of his, from his base in Afghanistan.
“They were really supportive of me -- they were helping me find a location and get all my financing for the fee,” Sinclair said. He opened his Pita Pit in Las Vegas on January 23, positioning himself strategically near the University of Nevada Las Vegas and its hungry students.
The financials differ, but opening a franchise generally involves paying an initial sum, ranging from thousands to hundreds of thousands, to the parent company, as well as an ongoing yearly royalty.
Some opt to cover the franchise fee by taking out a loan, and the Small Business Administration’s Patriot Express loan program aims to reduce paperwork for veterans applying for business loans, including for franchises.
Wireless Zone gave Turner 10 percent off his franchise fee. Because of the Patriot Express program, he was able to get the rest of the money loaned to him within 60 days.
“Between the treatment that I got from Wireless Zone and the SBA, it made it that much easier,” Turner said.
Several veterans emphasized that former servicemen like the structure and guidelines most franchisers provide.
Ray Bramble, a former member of the U.S. Army’s Presidential Escort Unit, opened an Aire Serv in Front Royal, Va. He previously owned a heating and air conditioning business, but he said he prefers the cut-and-dry franchising world. Aire Serv’s head offices tell him the best equipment cost ratios, advise him on when to spend advertising dollars and train his technicians in customer service.
“In the military, if someone says, ‘If you do this, this is the result you’re going to get,’ I see no reason to do it any different,’” he said. “I was successful with my own company, but not as stable as I am now.”
Franchising isn’t always an easy path, however. Sharpe, from the American Legion, said veterans need to be careful which franchise organizations they buy into because not all companies are up-front about the returns a franchisee can expect. A certain zip code may not actually be as desirable as a franchiser says it is, for example.
“Some franchises are only concerned with selling zip codes, not assisting individuals open a business,” Sharpe said. “We have been contacted by a number of veterans who have fallen into such scams.”
Sean Kelly, a franchise consultant and publisher of the site UnhappyFranchisee.com, said franchising is a good path for veterans — as long as they find the right franchiser. Kelly has heard reports of high failure rates with some companies.
“They need to take a look at the franchise disclosure document that’s provided to them — look at how many lawsuits have there been and call other franchisees,” he said. “There are good franchises, bad franchises and really terrible franchises.”
Turner also recommended extensive market and demographic research. He described the process he took to find Wireless Zone: “I first looked for fastest-growing and most sustaining sector in communications, and that’s wireless. Then I looked for the best network provider in the business, and that’s Verizon. Then I looked for franchisors that had something that they could offer me, and I found Wireless Zone.”
While he was overseas, Sinclair, who has a degree in accounting, requested Pita Pit send him a 30-page report on incomes and demographics in 23 different potential locations.
Sinclair also suggested veterans who want a franchise business start laying the groundwork early.
“If you want to get out of the military, have a plan,” he said.
The biggest change between military service and customer service, Sinclair and Turner said, is learning to manage employees instead of soldiers. Military justice, Turner explained, means subordinates do as they’re ordered -- or risk jail time.
“Your chain of command carries some very different weight in the civilian world,” he said.
Sinclair is also quickly learning that being a corporal is not the same as being a manager. He’s learning to be less hard on his 13 employees, though he still refers to delivering lunchtime pita platters as “mission accomplishment.” He said he’s learned a few important lessons in the month he’s been open.
“You can’t ask your employees to do something they just can’t do, and you have to understand when they’re having a hard day,” he said. “I’m working on my HR skills.”
This story is part of our special series on small business success, which will be featured in Capital Business on Monday, March 5.