Franchise Programs for Veterans

As franchisors look to recruit new franchisees, one viable segment of the population is veterans transitioning out of active duty. The International Franchise Association (“IFA”) has established the VetFran program that links veterans with franchisors willing to offer discounts and incentives to veteran franchisees.

If you, as a franchisor, are interested in participating in the IFA’s VetFran program, you must be a member of IFA. All members of IFA are eligible to participate and there is no fee to be listed as part of the VetFran program. If you are already a member of IFA, you can sign up for the VetFran program by going to: http://dev.vetfran.com/franchisors/signup/.

While there are no fees directly associated with joining the VetFran program, there are requirements that a franchisor discount fees. Each franchisor must offer an incentive to veterans of no less than a 10% reduction on the initial franchise fee. Beyond that, there is no restriction as to what types of discounts and/or benefits are offered to incentivize veterans. Several franchisors eliminate the franchise fee entirely or offer a lowered royalty rate.

Once the franchisor is part of the program, the franchise system is listed in a directory of franchise opportunities. If you desire to have a more prominent listing, for an additional fee, a franchisor can have their franchise system featured prominently in the directory and in certain advertising. It should be noted that the VetFran website receives over 40,000 hits per year and the IFA is constantly working to establish relationship with national veterans programs and groups to bring this program to their attention.

The advantages to joining VetFran are several. The franchisor is able to use the VetFran logo on all promotional material and can use it on their letterhead and website which can be a helpful marketing tool to let the public understand the franchise system supports veterans. It is a minimal investment (through membership in IFA) to have access to a group of prospective franchisees that may otherwise not be as accessible. In addition, the franchisor can create a “calibration” assessment to help the VetFran program locate ideal franchisees. The assessment helps match a prospective franchisee’s skills and experience with a particular franchise opportunity. Lastly, VetFran is part of the Veteran Job Bank that allows veterans to search for veteran-friendly job opportunities upon transitioning out of service.

Once a part of VetFran, there is no prohibition against the franchisor making direct contact with veterans programs to promote the franchisor’s discount and veteran-specific offering. A franchisor is not restricted to using only the advertising made available through the VetFran program.

Should you desire more information about the VetFran program, you can find information on their website at: www.vetfran.com.

(This blog post is provided for informational purposes only and is not legal advice or an endorsement of any product, service, group, organization or program.)

Business and Franchise Tips

Over the past month, our office has gathered some basic information that relates to businesses and franchising, and more specifically to franchises in the restaurant industry. The basic information below is meant to help franchisors plan for the year and future growth and expenses. While some of the information has been taken from various publications and resources, some of the information is our opinion. The below is not legal advice or our promotion of any products or services and should not be construed as such.

1.    Bernstein Research in New York expects a 4% growth in restaurant sales in 2013—assuming the economy remains about where it is now.

   2.  OBAMACARE –the below are some statistics that are meant to help you understand the possible impact of the health care mandate.

a.    The Hudson Institute (for IFA) estimates the health care mandate will cost the franchise industry $6.4 billion dollars.

b.    McDonald’s estimates that it will cost $10,000 to $30,000 per store.

c.    Jack in the Box estimates the cost to be $10,000 per employee, but that the cost can be covered by a 1% increase in menu prices.

d.    Most sources and experts are recommending a price increase over cutting working hours, but that is in flux. Each franchise system needs to balance the fear of backlash relating to cutting working hours versus the fear of backlash relating to increased menu prices and/or loss of menu items.

e.    GE Capital believes the restaurant sector will ultimately weather this and will be able to cover the increase in costs through price increases alone. However, the amount of price increases and the public perception of an increase as the economy remains slow was not specifically addressed.

3  3.  CONSCIOUS CAPITALISM BY JOHN MACKEY

This book may be a helpful read to franchisors and business owners in all sectors. We have not read the book but several articles have referenced both John Mackey and his book in recent publications. John Mackey is the founder of Whole Foods. His basic theory is that the owners of a corporation should view the business as an opportunity to create value for the owners, employees and the communities where they do business. Value is defined in many different ways. In the long run a company that creates value will do far better because doing so changes the way the managers and other employees view what they are doing. However, it is important that the value created needs to become a central part of the corporate culture if this Whole Foods model is to succeed.  The book questions the traditional “profits and all costs” model as being often counterproductive and one that can readily create enemies.

4  4.  RULE OF THUMB FOR EQUITY CAPITAL –For Investors in a restaurant system

As a typical rule of thumb for restaurant acquisitions, the equity capital investor is looking for:

a.         $750 per square foot in sales;

b.         $300 per foot cost to build;

c.         18-20 percent unit level cash flow;

d.         Cash-on-cash return on investment of at least 40%

The above points and tips hopefully will help you in your business whether it is in creating growth, in creating a new corporate culture or in preparing your business for acquisition by another individual, company or investment firm.