May 24 (Bloomberg) -- Robert Rummells, a U.S. Army Ranger for 22 years, says it was a natural transition when he opened a Mosquito Joe pest-control franchise in Richmond, Virginia, earlier this month.
“I’m an outdoor type of guy, and I didn’t want to be chained to my computer in an office, talking on the phone,” said the 49-year-old, who tried jobs such as installing equipment at a community college and simulated firearms training after retiring from the military in 2009. “I learned I needed to work for myself.”
As more former service personnel turn to entrepreneurship, they’re generating jobs that are helping to cut the unemployment rate for veterans to a four-year low of 6.2 percent in April, lower than the 6.9 percent rate for adult non-veterans. The boost to the labor market matters: More than a million Americans are projected by the White House to transition out of the military through 2015.
One growing option is franchising. Veteran-owned franchise openings reported last year increased by 11,469 compared with 6,081 in 2010, according to the International Franchise Association, a Washington-based trade organization.
“People who come from the military like to belong to systems,” said Mary Thompson, 49, a logistics officer for the Marine Corps from 1984 to 1992 and now president of Waco, Texas-based Mr. Rooter LLC, an all-franchised plumbing and drain cleaning company.
Veterans are “a good match” given the discipline required to manage a franchise, said Thompson, who was chairman until February of VetFran, a special program by the IFA to encourage entrepreneurship by veterans. “There are just so many skills that translate over.”
To emphasize hiring, the IFA along with partners such as the White House, Department of Veterans Affairs and Small Business Administration, set a goal to employ 80,000 former military personnel and spouses in franchising by 2014. An October 2012 survey commissioned by IFA showed 64,880 had found jobs in the industry since November 2011, when the Operation Enduring Opportunity campaign began.
“Veterans do well in the franchising arena,” said Rhett Jeppson, associate administrator of SBA’s office of veterans business development and a lieutenant colonel in the Marine Corps Reserve. “It’s a way to provide opportunities for them, especially if jobs aren’t available.”
The leadership and improvisation skills developed by the Israeli military in high-stakes situations produces “battlefield entrepreneurs,” one reason the nation has prospered, authors Dan Senor and Saul Singer wrote in their 2009 book “Start-Up Nation: The Story of Israel’s Economic Miracle.”
As tens of thousands of U.S. veterans return home, linking them up so “our business community is literate about their skills and how they are applicable in an entrepreneurial setting,” will be critical, Senor, a foreign policy adviser to former presidential candidate Mitt Romney, said in a Bloomberg Television interview in February 2011.
Veterans own about 2.4 million businesses, or 9 percent of all U.S. businesses, employing 5.8 million workers, data from the SBA show. More former military personnel may consider starting a business as hiring elsewhere remains uneven.
Payrolls nationally climbed in April by 165,000 workers, after gains of 138,000 in March and 332,000 in February, Labor Department data showed. The unemployment rate for Americans 16 and older fell last month to a four-year low of 7.5 percent.
Automatic federal budget cuts that began March 1 threaten to restrain some employment initiatives. The SBA’s Boots to Business program -- a public-private partnership to provide entrepreneurship training for those transitioning out of the military -- is awaiting funding for a national rollout this year, Jeppson said.
While veterans can tap lending programs supported by the SBA such as Patriot Express, banks remain cautious about smaller borrowers, Jeppson said. About 75 percent of veteran franchisees have just one unit, according to IFA’s 2012 survey.
The transition from the military can sometimes be difficult, especially for recent veterans. Joblessness for those who served in Iraq or Afghanistan since October 2001 was 10.9 percent in August 2012, the latest Labor Department figures available show.
Kevin Safley, who served with the National Guard in Iraq in 2004 and 2005 and between 2009 and 2010, said he had a “very frustrating” experience when he returned to find his job as fleet maintenance manager at a crane company in Portland, Oregon, was gone. Even with a mechanical engineering degree, he said, employers were reluctant to hire someone who could be called back to duty or offered very low wages.
“The only thing I wanted to do was work a 40-hour week and enjoy the weekend but that wasn’t happening,” said Safley, 37.
When he turned to franchising, his credit history was a hurdle, he said. He eventually got an SBA loan as a service-disabled veteran to open a Cottman Transmission auto care franchise in Vancouver, Washington, last year.
“It’s been rough, I’m still learning,” Safley said. “But we’re making money, and there are lots of customers. If I don’t give up, things will work out.”
More awareness campaigns to highlight entrepreneurship as “a viable alternative” will spur business ownership among veterans, said John Ondik, an instructor at the Wharton Small Business Development Center in Philadelphia.
Once there are more signs the economy is improving, small firms “are going to be first movers” in hiring, while larger establishments typically try overtime and other ways to postpone adding workers, said Ondik, who retired from the U.S. Navy Reserve in 2008.
Among franchise owners, veterans are 30 percent more likely than non-veterans to have hired a former service member, according to the IFA 2012 survey of 791 businesses. Yet 80 percent of franchisees weren’t aware of special tax credits for employers who hire ex-military people.
The services background clicked when David Povlitz, 64, founder of Anago Cleaning Systems and a veteran who was in South Korea in the late 1960s, met 66-year-old Terry Mollica, who served in the Vietnam war. He signed on Mollica in 1991, and they’ve expanded the commercial cleaning business to more than 2,000 U.S. franchises. Anago employs 20 people at its corporate office in Pompano Beach, Florida.
The success “goes back to my survival training in the military,” said Povlitz, who had to rely on his savings to start the franchise after exhausting his veterans’ benefits years earlier. “It’s not a get-rich-quick scheme. Nothing is easy, but there are opportunities out there.”
Michael Lambert, a 41-year-old former Marine, is trying something new as he prepares for the June 13 opening of a Valpak direct marketing and coupon franchise in Lubbock, Texas. He gave up a government contracting job in Denver when he moved so his wife could join her family’s farming business.
“It’s a whole different paradigm,” said Lambert. He has to reach out to local companies to build sales, in contrast with his prior, intelligence-related work that he couldn’t discuss with anyone. He plans to hire two full-time workers to expand after a year. “Now, this is up to me and my ability. There’s a lot on the line.”
Army veteran Dave Leonard, who is opening a Bach To Rock music school in Wayne, Pennsylvania, said as a veteran he got discounts worth about $40,000 on franchising and licensing costs and a royalty waiver for the first six months from the franchisor. Marketing and logistical support also made the business an attractive choice, besides his love of music. His Gibson J-45 guitar traveled with him when he was shipped out to South Korea in 1966 and is around almost five decades later.
Franchising “offers a middle ground, where you’re running your own business but you also have a partner,” said Leonard, 67, who is interviewing teachers for instruments such as piano and drums ahead of the July 15 opening. “Initially, I’ll need five to 10 people on staff, part time.”
Rummells, the former Army Ranger, says work has begun in earnest after his bright yellow van, outfitted for bug-control equipment, arrived this month. He snagged 15 customers at one trade show, is working on a contract for an outdoor wedding in July and looking forward to more business.
“It feels like I’m on patrol,” he said. “This time, I have a new enemy. Mosquitoes, ticks and fleas.”
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