Article
From military service to quick-service
Franchise incentives and SBA loan programs help veterans find funding or other assistance.
March 9, 2009
After 20 years as a Navy pilot, Peter Turner weighed his retirement options: fly commercial planes or become a multiunit quick-service franchisee. He scuttled the commercial pilot idea because it would take him away from his three children.
So, Turner, 44, considered several brands before choosing Dunkin' Donuts as his franchise of choice. Turner liked that Dunkin' Donuts offerings extended beyond coffee and doughnuts.It also helped that Dunkin' Donuts offers veterans a 20 percent reduction in its franchise fee, which ranges from $40,000-$80,000.The company is one of several QSRs that participate in the International Franchise Association's Veterans Transition Franchise Initiative (VetFran), a discount program for veterans.
"It opened up a new opportunity I didn't know was out there," he said. "The discounts allowed me to expand faster."
Turner and a silent financial partner signed a 12-unit franchise agreement in the Raleigh-Durham, N.C., area in 2007, obtaining financing through a conventional lender. Turner's wife, Bliss, is another partner. Turner has opened two stores so far, with two more scheduled to open by July.
And last year, he used the VetFran discount to sign another multiunit agreement for more than 20 units in the Minneapolis market, near his hometown of Minnetonka. The first store in that market should open in late 2009 or early 2010, he said.
Although he had no prior restaurant experience, Turner said his time in the military provided him with management, leadership and operational skills that translate well to running a franchise.
"Instead of flight operations or leading a combat information center that's on a destroyer, you've got a quick-service restaurant, you've got equipment, you've got people and you've got a mission (just as in the military)," he said.
Veterans sought for their experience
Terry Hill, vice president of publishing and VetFran staff liaison for the IFA, said that many franchisors value veterans for those reasons.
"There's a strong belief in the franchising industry that veterans make excellent franchisees because first, they've been trained by one of the greatest educational institutions in the world, the U.S. military, so they operate in an environment which is not unlike a franchise environment," Hill said. "You have a headquarters that establishes standards, provides training, provides information and feedback and strategies.
"Veterans come into that, they're mission focused already, they know how to follow a system, and for the most part, they have excellent work habits, work ethics, and those kind of things just adapt very well to the franchise model."
The VetFran program started in 1990 during the Gulf War by the late Don Dwyer Sr., founder of The Dwyer Group, who, as a veteran himself, wanted to help veterans returning from active service. The program languished for years before gaining popularity and increased participating after the Sept. 11, 2001, terrorist attacks.
About 365 of the IFA's more than 1,300 member companies voluntarily participate in the VetFran program. IFA members do not pay any additional fees to take part in the program, and most offer a 10 percent to 20 percent discount on the franchise fee.
"The idea is to lower the upfront costs to the veteran because that's the one thing they're going to encounter when they buy a franchise," Hill said.
IFA members' interest in the VetFran program has grown 5 percent to 8 percent in the last year as more military personnel return from Iraq and Afghanistan — and as the economy has deteriorated.
"The change in the economy has put a much stronger focus on veterans (as potential franchisees)," Hill said.
SBA programs
The Small Business Administration also offers a number of programs geared toward the military community, from small business loan products to business counseling or development training, most through third-party business development and veteran outreach centers.
The SBA's military-geared loan products include the Patriot Express Pilot Loan, introduced almost two years ago. Veterans, service-disabled veterans, reserve component members, discharging service members and spouses of service members or veterans, as well as widowed spouses of those who died in the service or of a service-connected disability, are eligible for the Patriot Express program, which provides loans up to $500,000.
While the Patriot Express program does not automatically qualify military members or veterans for a loan, it does streamline the process so that applicants are informed of approval within 24 hours of applying. The Patriot Express program also caps the interest rate at 2.25 percent to 4.75 percent over prime, depending on the size or term of the loan.
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Those elements of the Patriot Express program, especially the loan guarantee, make the loans more attractive to the third-party lenders who typically provide them.
"That gives the bank an additional incentive to approve a loan that otherwise might have been a little marginal," Elmore said, noting that some military personnel have their credit damaged during the course of their service. "We're trying to, if you will, still make sure that our resources help fill that gap."
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