Military Careers, Second Careers - Army Times

Be your own boss with a franchise business

Maybe you're tired of someone else calling the shots. Maybe you want to be your own boss. If you're thinking about a second career and the key word in your dream job is "independence," you may be suited to open a franchise.

Many people have taken the leap as franchise owners and landed successfully. According to www.AZFranchise.com, a Web site that lists franchise statistics and opportunities, about one in 12 U.S. businesses are franchises.

As with any career move, the more you know in advance, the better your chance for success.

Jim Wilson is an expert on franchises. He spends a lot of time explaining what's involved and how to turn the dream of ownership into a profitable business. A former Navy flight officer and pilot, Wilson attained the rank of commander (0-5), attended law school and retired from the Navy in 2000. Since then, he's been representing small and established businesses and start-up companies with legal, tax and business advice.

This year, he and another attorney partnered to form Wilson Stoyanoff, PLC, which works exclusively with business clients.

Q As a former service member and now small-business and franchise expert, why do you believe veterans make good franchise owners?

A Franchise systems are managed in ways similar to the ways the military manages itself. The big picture is refined by a staff at the franchisor, the company that sells the franchise. They try to analyze changing market conditions and availability of resources to establish procedures and lay out changes that might be needed to succeed.

I flew EA-6Bs in the Navy. Every question that came up about the plane could be answered in the NATOPS manual. Franchise systems also have operating manuals. All procedures are in that manual, along with guidance for dealing with unusual problems. Veterans should find a great many similarities in franchising.

Q You indicate that although many people are familiar with basic product lines carried by franchises, some aspects of owning a franchise aren't so obvious. Can you explain?

A Some franchisors try to sell the product rather than the franchise. For example, they say, "Have a piece of pizza. Like it? Want to buy a franchise that sells this pizza?"

People need to focus on whether there is a market for the products and services, and whether the franchisor's system provides advantages that will help franchisees be profitable. Are supply agreements in place so the new franchisee can purchase goods at the best prices? Are operating efficiencies set out in the manual so it's easier than if you tried to do it on your own?

There are other advantages for a franchisee, like national product advertising campaigns during the Super Bowl or March Madness, which an individual business owner could never hope to get.

Q Why do some businesses fail, and what should prospective owners know in advance?

A The two most common reasons why businesses fail are poor financial management and misjudging the little things that make up a business.

Managing involves knowing on a daily basis what is going on and how these activities will affect the business. That means knowing to send federal withholding taxes to the IRS on a quarterly basis, or you'll pay a 100 percent penalty. It means managing financial obligations and understanding when and where cash comes from and when bills are due. I usually recommend hiring an outside financial manager.

The other area is misjudging little things. If you run a sandwich shop, you have to know the correct temperatures for storing meat from the date of the next delivery. Then there's market acceptance. Here, a small franchisee gets a real advantage because the franchisor will have data about whether the business will be accepted in your market -- a tough lesson to learn on your own.

Q How can service members find out more about financial resources to help them get started?

A Banks want to see a couple of years of operating history to ensure that the borrower is not a credit risk. The Small Business Administration can help by guaranteeing a portion of the loan. The SBA will pay off up to 80 percent or 85 percent of a loan if the borrower defaults. This makes a lender more willing to lend to a new company. Of course, you're still fully liable, and the SBA and the lender will take a security interest in your house or property.

There is a special program under the SBA called VETFRAN. Veterans need to come up with no more than 10 percent of the entire cost of acquiring the franchise in cash. Only franchise systems with no more than $150,000 in start-up costs and those that have agreed to participate are eligible. For more information, go to www.franchise.org.

Q What should those with no previous business experience consider before taking the first steps toward franchising?

A The first thing I want to tell veterans who think they have no business experience is that they have plenty of business experience. They have managed resources, led people in an organization and carried out plans to meet goals, which are important aspects of running a business.

Also recognize that a big part of your reputation and success depends on customers having a good and uniform experience when they visit other franchises. This is another similarity to military service -- uniformity. Just as every service member should respond uniformly to certain circumstances, franchisees in the same system should provide the same experience to their customers.

Another consideration is time. A franchise is essentially a license to conduct a business for a period of time. So time-related aspects, like the lease or the loan payments, should be tied to the length of the franchise agreement. Otherwise, you'll have a leased building with no business to run or a business with no place to run it.

Lastly, there's no guarantee you'll immediately have solid cash flow, so plan how to cover living expenses for a few months.

Q What are common misconceptions or myths about franchises that you could lay to rest?

A I once asked a soon-to-retire utility executive whether he would consider a fast food franchise. He said he didn't want to flip hamburgers for a living. So I asked him to describe the worst job at his company. He said it was working on high-power lines in the middle of the night. When I asked him how many times he did that in his career, he said, 'Never. I was in management.' So I asked him why he thought managing a fast food restaurant would be any different.

Buying a franchise is buying a business. As the owner, you manage the financial, local marketing, human resources and production aspects. You don't do the work. You manage it within the constructs of the operating manual.

While running a franchise isn't like starting a high-tech business in your garage, the average person will realize a pretty good entrepreneurial experience and one that can be very satisfying.

For more information, contact Jim Wilson at (804) 864-5268 or Jim@WilsonStoyanoff.com.