Veterans Look to Franchising Opportunities for New Careers
Like other American veterans, Air Force Master Sgt. Darrel Ferdinand needed a plan for his life after war. And one sector of the economy offered an answer — starting his own business.
He hopes to make that happen within the next six months when he opens a UPS Store near his home in New Orleans East, an area struggling to attract businesses seven years after Katrina.
"I'm trying to get the future right," says the 47-year-old Ferdinand.
Finding employment has been a struggle for many of these newest war veterans.
An estimated 218,000 Iraq- and Afghanistan-era veterans were jobless the second quarter of this year, according to the Bureau of Labor Statistics. The unemployment rate for veterans of Iraq and Afghanistan stood at 10.4% in the second quarter.
For the most vulnerable group of veterans, ages 18-24, joblessness was 21.9% in the second quarter, higher than the 15.3% rate for their civilian peers, says BLS economist James Borbely.
In response, hundreds of restaurant and service chains are offering incentives to help veterans open a shop — waiving franchise fees, reducing royalty payments and guiding them through crafting business plans.
For Ferdinand, UPS declined to charge a nearly $30,000 fee to open the store. For James Price, a 24-year-old Iraq war veteran from Texas, soon to operate a WIN Home Inspection business out of his home, a $40,000 fee was set aside.
"Veterans are used to following structure and systems," says Steve Caldeira, president and CEO of the International Franchise Association. "If you look at the basic tenants of franchising, it's all about following system, structure, a proven business model. … If you run your franchise operation and mirror those qualities from the military, more often than not you're going to be successful."
Late last year, the association expanded its veteran assistance program, in cooperation with the White House Joining Forces initiative, encouraging members to develop ways of easing veterans into becoming franchisees.
Caldeira calls it "formula entrepreneurism" and says that 475 companies are participating. Since November, 4,200 veterans have begun businesses for chains such as UPS Stores, Dunkin' Donuts and Bennigan's restaurants, as well as car care, cleaning and furniture-moving franchises.
The goal by 2014 is ownerships or jobs for 75,000 veterans and their spouses, Caldeira says.
But corporate leaders concede that some requirements to be a franchisee may be out of reach for many veterans. Even when fees are waived, cash is needed for real estate, building modifications, equipment and hiring.
Restaurant chain Popeyes, for example, says it is waiving its $30,000 franchise fee and reducing for the first year its annual royalty charge from 5% to 2%. But Greg Vojnovic, vice president of development, says the company requires that veterans assemble at least $250,000 for start-up expenses and prefers some experience in restaurant management. The requirement may be part of the reason that the initiative, started 15 months ago, had not yet led to a veteran opening a franchise, Vojnovic says.
The financing requirements are less demanding for smaller operations such as the UPS Stores, which require $60,000 to $100,000 in cash, says Tim Davis, UPS Stores president.
They company offered 10 fee-free franchises to veterans late last year, filled that commitment and is offering 10 more, he says.
"The thing that the veteran really brings (is) … they know how to lead. They've developed an appreciation for quality and excellence that's really been instilled in them. That's really what franchising is about," Davis says.
Ferdinand, a member of the Air National Guard, says working with UPS reminds him very much of the military, from the international operations, to the camaraderie between store operators, to everyone wearing the same uniform.
"There's nothing better than working for yourself and making money for yourself … having something stable for my kids," says Ferdinand, who is married and the father of three.
UPS is helping him negotiate the lease in a strip mall location not far from his home, and he hopes to pull together start-up costs by borrowing against his retirement or obtaining a loan with the help of the Department of Veterans Affairs.
Price, a member of the Texas Army National Guard who did a tour in Iraq from 2009 to 2010, was studying business as an undergraduate at Wayland Baptist University in Lubbock when he began researching small-business opportunities. His research led him to the WIN program.
With assistance from the Small Business Association, he acquired a $50,000 bank loan for start-up costs, including the purchase of a new GMC Terrain that will carry the WIN Home Inspection logo.
Just recently, Price passed the Texas state licensing exam for home inspection. He hopes to earn more than $100,000 a year.
"I didn't wake up (thinking), 'I really want to do home inspections,' " he said. "But I thought it was interesting. I figured I'd be pretty good at it."