Ron Bender and Justin Ghadery Discuss the Benefits and Challenges of Franchising for Veterans and Their Families
Two leaders of the International Franchise Association’s VetFran initiative on Wednesday presented a Franchising 101 webinar for veterans and spouses of veterans who might want to invest in a brand. Ron Bender, vice chair of the VetFran Committee, and Justin Ghadery, a Marine Corps veteran and VetFran Committee member, started by defining franchising and then delved into due diligence, selecting a brand that suits the individual entrepreneur, and drivers of veteran franchisees’ success. As Bender said in his opening, the webinar would tell “why franchising is great for veterans and why veterans are great for franchising.”
Early on, Bender clarified that franchising “isn’t an industry. It’s a business model, a style of doing business” across more than 120 industries and 300 business lines – home, personal, pet and business services; lodging; real estate; restaurants; and more. He explained that a franchisor is an organization that generates the business, and a franchisee is someone who pays a fee to do business under a franchisor’s umbrella. Franchise categories and examples include:
- Traditional retail brick and mortar: 7-Eleven, Ace Hardware, GNC.
- Nontraditional retail brick and mortar: Sport Clips, AAMCO, UPS Store.
- Food and restaurants: Dunkin’, Zaxby’s, Wing Zone, Scooter’s Coffee.
- Home-based: Dream Vacations, Blue Moon Estate Sales, ShelfGenie.
- Mobile and virtual: Aussie Pet Mobile, Snap-on Tools, Fibrenew.
Among those examples are household names and emerging franchises. “Some people want to join a big brand, which will have a more-restricted operation. Others like the idea of being early adopters,” where they have more flexibility, said Bender, a certified franchise executive.
Franchising’s Benefits
While warning that there’s a risk to any business investment and that “any franchise will be hard work,” Bender listed these advantages of franchising as opposed to an independent start-up:
- Reduced risk.
- Access to a proven business model.
- Valuable brand recognition.
- Access to established supply lines and purchasing power
- Training.
- Possible veteran-only discounts on fees and supplies.
Franchising’s Challenges
Ghadery said franchising has “challenges, but they’re not necessarily negative,” mentioning:
- Owners are not completely independent.
- Owners pay continuing royalty and marketing fees.
- Poorly performing franchisees or a franchisor problem can damage the brand.
- Franchise agreements expire, and franchisees may have little say on renewing or termination.
- Expansion opportunities may be limited because territories are unavailable.
What Franchisors Want
Franchisors welcome veterans because “they know their missions and how to complete their missions,” Bender said. Business is the same, with the mission being profitability. Beyond that attribute, he said potential franchisees should understand the concept, have access to capital, be motivated and hardworking, and possess a history of success in dealing with people. Ideal franchisees also should be eager to learn and eager to train others, he emphasized.
VetFran can guide a veteran toward the best franchise for himself or herself personally. “It depends on what your goals and skills are,” Bender said. But franchisee candidates must do their due diligence. “Read the Franchise Disclosure Document [FDD] cover to cover and understand it. We recommend bringing in an attorney to help you understand it.”
The FDD’s Item 19 outlines franchise performance, such as how many units are open, terminated, and transferred. “Franchisors can’t cherry-pick. They must supply all information” required by the Federal Trade Commission, Bender said. “If a brand is signing a lot of franchisees but they’re not open or are slow to open, find out why. If they’re opening fewer units than they’re closing or have a lot of resales, find out why.” The FDD also covers the fees that franchisees must pay.
Webinar attendee Ralph Yarusso, a certified franchise executive, certified franchise consultant and an Air Force veteran, interjected that Item 20 of the FDD contains contact information for other franchisees within the brand. “Have an intimate conversation with them. That’s critically important to due diligence,” Yarusso advised.
Evaluating a Brand
When assessing a brand, Ghadery said to consider the demand for its services and the competition. A franchisee candidate should seek a brand that is differentiated from its competitors, has excellent training and support services, and is led by executives with experience. Also, weigh brand recognition and the franchise’s commitment to veterans and diversity.
Selecting a franchise requires soul-searching, said Bender, citing these factors:
- Consider your capability to operate the business.
- Is the investment level right for you, with comfort-level money remaining after launch?
- Do you want to do this every day for years?
- Will your community and your family support the business?
- “No one bats 1,000”: What caused the failures of this brand’s franchises?
- Does the franchise have growth opportunity? Some have maxed out their territories.
- Will the franchise accommodate your exit plan to go part-time, sell out, or pass it down to your family?
Why Franchises Like Veterans (and Vice Versa)
In concluding, Ghadery and Bender underscored the symbiosis between franchisors and veterans that trickles down to their employees. Ghadery noted that veterans comprise only 7% of the U.S. population but that 14% of U.S. franchisees are veterans, while adding that franchisees hire other veterans and their spouses over 30% more often than non-veteran franchisees. Ghadery and Bender said veterans enjoy inherent advantages as franchise owners, including:
- Veterans are team leaders and experts at following standard operating procedures.
- They are hardworking and mission-driven.
- Veterans are skilled managers of people and resources.
- They happily share best practices with fellow franchisees because they appreciate camaraderie.
- Franchises preferentially recruit veterans with incentives such as reduced initial franchise fees, lower credit card processing fees, and beneficial financing, loan terms and discounts. VetFran’s 500 member companies (Neighborly and Snap-on were mentioned as examples) provide such incentives.
Click here to learn more about veterans’ opportunities in franchising. To learn how VetFran helps and educates veteran franchisees, click here.
