Veterans Buying Franchises

Entrepreneurs
Captain Franchise, Sir Michael Bobelian, 07.16.03, 7:00 AM ET

NEW YORK - U.S. soldiers are in demand--and not just by Uncle Sam. A large number of American forces stretch across the globe: 1.4 million servicemen and women are on active duty, and another 1.3 million reservists and National Guard members remain on call. Last week, General Tommy Franks indicated to Congress that the Pentagon will maintain a high level of troops in Iraq for the foreseeable future.

But those who do come home and retire can take comfort in the fact that corporations have begun their own campaigns to recruit highly prized veterans.

Just one catch: There may not be enough retirees to go around. This spring, the International Franchise Association, an umbrella group with 853 members--including Dunkin' Donuts' parent Allied Domecq (nyse: AED - news - people )--dusted off a program first offered after the Gulf War a decade ago to help military retirees buy and run franchises.

Exxon Mobil (nyse: XOM - news - people ), which relies on franchisees to run its gas stations, recently became the 100th member to join VetFran. Don J. DeBolt, president of the IFA, expects about 200 to 250 franchisors to sign up and suspects that many more will offer incentives to veterans without joining the program. Rather than set one comprehensive program, the IFA encouraged participants in VetFran to agree to offer potential franchisees their "best deal," often a discount on the cost of ownership. Allied Domecq is offering a 20% discount on all three of its brands, which also include the Baskin-Robbins ice cream chain and sandwich maker Togo's. VetFran participants crave the unique training veterans acquire through military service. Randy Burzynski, manager of franchising for Allied Domecq, cites organization skills, discipline and leadership experience as critical ingredients for successful franchisees. And then there's the contrast veterans offer to today's scandal-plagued economy.

Drew Myers, a former Marine captain and president of Recruit Military Inc., a Cincinnati-based headhunter that has placed veterans in nonfranchise positions at Coca-Cola (nyse: KO - news - people ) and General Electric (nyse: GE - news - people ), says his clients "are now eager to have character, work ethic and high integrity" in their employees. While the IFA's DeBolt notes that 80% of franchises cost less than $250,000 and financing is abundant, VetFran is clearly aimed more at the older, wealthier veteran. (Retirees with 20 years of military service receive a pension equal to at least one-half of the salary earned in their final year for the rest of their life.) Sears Carpet and Upholstery Care, a VetFran participant and a unit of Sears, Roebuck (nyse: S - news - people ), requires an initial cash investment of up to $94,500 and a total investment reaching $362,300.

UPS Store franchises of United Parcel Service (nyse: UPS - news - people ) require only a $7,500 initial cash investment, but the company screens out applicants with a net worth below $150,000 and lacking less than $50,000 in cash or liquid assets. Few twentysomething soldiers can fulfill these qualifications. But younger military who decline to reenlist remain in high demand at large corporations, particularly junior officers, says Myers. At 26 to 30 years old, they already have four to eight years of "stringent, stressful, quality leadership experience." Plus, 98.3% of commissioned officers hold a college degree, compared to 3.5% of enlisted soldiers. Capital One (nyse: COF - news - people ) hires hundreds of officers annually (usually as analysts) because of their higher education, according to a spokesman. CSX (nyse: CSX - news - people ) seeks engineers and mechanics for its technology-oriented operations, according to Myers, while AutoNation (nyse: AN - news - people ) recruits veterans to be controllers in its stores. So far, participating franchisors have signed up only 28 veterans and the rest may be hard-pressed: Military retirements are well off their historic highs.

A Department of Defense report shows that 44,714 servicemen and women (about 3% of all active personnel) retired with maximum benefits last year, down from about 66,000 in the years following the Gulf War. And the current state of U.S. involvement in Iraq all but rules out a spike in retirements this year. Myers notes that a so-called "stop loss" program currently in force prohibits many Marines from retiring. (The officer corps has been shrinking, too, to 217,011 in 2001 from 304,595 in 1988.) Despite the low supply of veterans, franchisors remain eager to recruit them. "We'd like to sign up as many as possible," says Allied's Burzynski. Like the soldiers' families waiting for their loved ones to return home, he will have to wait. With American forces scheduled to remain in Iraq for the foreseeable future and a perpetual war against terrorism raging across the globe, a glut of veterans will not enter the workforce anytime soon.

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