A tax incentive to help veterans start their own businesses would provide a powerful boost for veterans who are ready to start a new career, and who are likely to hire fellow veterans
I had the honor to be invited to speak to the U.S. House of Representatives Committee on Veteran Affairs today, addressing the question “What can the Federal Government Learn from the Private Sector’s Successful Approach to Hiring Veterans?” The franchise industry has made it a mission to help veterans prosper, through both business ownership and employment, and new laws being considered by Congress could provide an even bigger boost by providing tax credits to help more veterans become franchise owners. Call or email your representative and senators to let them know about your support. You can find contact information for their offices here.
Below are my prepared remarks, provided to representatives.
Chairman Miller, Ranking Member Michaud, and members of the Committee, thank you for inviting me to testify today on successful private sector programs for hiring veterans. My name is Jim Amos, and I am the Chairman of Tasti D-Lite and Planet Smoothie, world-renown franchise brands of frozen treats and beverages. I am a veteran of the franchise industry, with past experience as the CEO of Mail Boxes Etc. (now The UPS Store) and as past chairman of the International Franchise Association. I am also a military veteran, a former Marine Corps captain and veteran of two combat tours in Vietnam. I appear before you today on behalf of Tasti D-Lite and the International Franchise Association.
With nearly one million veterans transitioning out of military service over the next five years, it is more important than ever that we help veterans re-integrate into the civilian economy. Our service men and women are looking forward to rejoining their families, going back to school or starting their own businesses. It is both an economic necessity and a moral obligation for our country to facilitate this transition.
Franchising is a large community of diverse business concepts that all grow and operate using the franchise business model. In this model, entrepreneurs open their own businesses and purchase the rights to operate their business using the trademarks, products, and business strategies of a proven franchise system. Franchise businesses are very common in the restaurant and hospitality space, but franchising is also popular in business services, personal services, retail, and automotive.
Veterans in Franchising – A Good Fit
In the franchise industry, we like to say that franchise owners are in business for themselves, but not by themselves. Franchise owners are typically highly motivated individuals who are natural problem-solvers. Successful franchise owners normally exhibit excellence in execution of precise and proven business plans. Franchise systems have complex, yet effective, operations guidelines, and the franchise owners that can best execute that system are the owners who realize the most success in their business. Many of the qualities that make successful franchise business owners are found in our nation’s service men and women, while the training techniques used in the military provide a significant skill set that is especially valuable in franchise business owners. Above all else, veterans possess the leadership skills necessary to run a successful business, and to persevere through tough times to keep that business running. Franchise companies actively recruit veterans as franchise owners, knowing that veteran-owned franchises tend to out-perform other locations.
For nearly forty years, I have been privileged to both create and support programs for hiring veterans as part of my career in franchising. What I have learned is that these young men and women are clear examples of American Exceptionalism. They are true American heroes who bring back security clearances, training, character, passion, dedication and a get-it-done mentality that any company or organization would pay to have as a human asset within their corporations. Spreadsheets and net-present values tell you the history of a company, but it is the people who tell you its future. When my brothers and sisters returned from Vietnam, we were met by a nation so anxious to leave an unpopular war behind that, by proxy, we left the veterans behind as well. We should ensure that this never happens again.
Recognizing that franchising is a great fit for entrepreneurial veterans, the International Franchise Association launched the Veterans Franchising Initiative, or VetFran, in 1991 in an effort led by Don Dwyer, a United States Air Force veteran and founder of The Dwyer Group, a family of franchise brands. The initiative was launched to support veterans returning from the Gulf War in their transition to the civilian economy. VetFran is an industry-wide initiative to encourage franchise companies to both hire veterans as team members and recruit them as franchise owners. As part of VetFran, franchisors offer special incentives to qualified veterans who purchase franchise agreements. Incentives range from thousands of dollars in initial inventory, special financing on equipment, or a discount on the initial franchise fee. Some franchise systems even offer one free franchise to a qualified veteran franchisee each year. VetFran members are also able to share best practices concerning the veterans hiring initiatives within their own companies. VetFran currently has a membership of 618 franchise systems.
When I first took the help at Mail Boxes, Etc., now The UPS Store, following the guidance put in place by the International Franchise Association and the VetFran program, we instituted a focused hiring program for veterans, offering benefits and incentives to become part of our family. As a result, hundreds of store owners and employees ultimately took advantage of these programs. When we purchased Tasti D-Lite, and later Planet Smoothie, the first thing we did was join the IFA and offer all veterans a 25% discount on the initial franchise fee as part of the VetFran program. We not only sold franchises to returning veterans, but also offered hiring programs that encouraged a full career path in addition to the route of franchise ownership.
As a starting point, I would like to point out that there are 23 million veterans in our country today, and 1.5 million of them are on active duty. An additional 1.2 million are in the National Guard or reserves. 3.7 million veterans are under age 39, and there are two million children in these veterans’ households, 95% of whom are under age 12. What results has VetFran been able to deliver to meet the needs of these veterans and their families?
A survey of VetFran members reveals that the program has achieved impressive results. In 2011, IFA launched Operation Enduring Opportunity, a campaign to hire, and recruit as franchise business owners, 80,000 veterans, wounded warriors and their spouses, through 2014. In a report on Veterans Day in 2013, a survey revealed that the franchise industry has nearly doubled its hiring target. Since 2011, over 151,000 veterans have started careers in franchising, including 5,192 veterans that have been recruited as franchise owners. The survey also revealed that veterans hire other veterans, as veteran franchise owners were 30 percent more likely to hire other military veterans than non-veteran franchise owners. Unsurprisingly, the survey went further to indicate that veteran-owned franchises were more successful than other franchise businesses, far our-pacing non-veteran-owned franchises in both sales and number of jobs created.
Of the franchisors surveyed, 97 percent indicated that veterans were a good fit as franchisees. Of the 3 percent that indicated that veterans were not a good fit for franchising, “high level of investment being a barrier” was given as the underlying reason. With this in mind, VetFran and its member companies continue to strive to help veterans overcome this financial barrier.
Veterans Entrepreneurs Act of 2013
To assist veterans in opening franchise small businesses, Rep. Bill Flores (R-TX) introduced H.R. 3725, the Veterans Entrepreneur’s Act of 2013, legislation that would provide a tax credit to qualified veteran franchise owners worth up to 25 percent of the initial franchise fee, capped at $400,000. In addition to the real estate, equipment and inventory necessary to open a franchise, the initial franchise fee is a significant investment, and remains a barrier to opening a franchise business. When coupled with the incentives offered by franchise systems as part of VetFran, this tax credit will go a long way towards helping veterans open new businesses. Given that veterans tend to hire other veterans, this legislation would also have a multiplying effect on veteran hiring. There is a similar piece of legislation in the Senate, called the Help Veterans Own Franchises Act, sponsored by Sens. Bob Casey (D-PA) and Marco Rubio (R-FL). The franchise community already has a demonstrated record of success in implementing veterans hiring programs, and we believe that this legislation will serve to expand on that success while providing veteran entrepreneurs with a significant financial incentive to realize the American Dream of owning and operating their own small businesses.
The franchise community has seen modest successes in hiring and recruiting veterans, but there is still so much work to be done to serve the veterans that have served us so honorably. Creating an industry-wide program for IFA’s member companies to participate in hiring veterans has allowed us to involve as many companies as possible, and share best practices for member companies that are building their own veterans hiring programs. Most of all, it has allowed us to “turn up the volume,” and stress the importance of these hiring programs across the private sector. As we recruit additional franchise systems to join VetFran, their industry peers want to join as well. We are constantly looking to build on the rolls of companies involved in VetFran.
Other significant partnerships have grown out of these efforts to hire and recruit veterans. Colleges and universities are building entrepreneurship programs for veterans and including franchising and franchise management as a course of study. Other proposals seek to include franchise training as education that can be covered under the G.I. Bill. Opportunities for veterans are rapidly growing, but we have not yet achieved our goal. Far too many veterans are unemployed, and others lack the support they need to successfully transition into the civilian economy. It is imperative that the private sector continue to build on its recent successes, and work as best it can with policymakers in Washington to create additional programs and incentives to hire veterans. I thank you for the opportunity to testify today, and I look forward to answering any questions you may have.