VetFran or VetScam? Turnover Rates of IFA-Endorsed Vet-Friendly Franchises

Franchise industry investigative journalist Sean Kelly is doing a deep dive into the practices of groups that profess to guide our nation’s veterans to prosperity and success through franchise ownership.  The initial findings are disturbing:  The IFA’s VetFran program is encouraging veterans to invest in many risky franchises with some of the the highest failure rates in the nation.   This is the first in a series.  by Sean Kelly

(UnhappyFranchisee.Com)  The VetFran website states:

“Founded in 1991, VetFran is a strategic initiative of the International Franchise Association and the IFA Foundation.”

VetFran’s stated mission is to “transition” veterans into franchise ownership, which it describes as “a gateway to small business ownership, prosperity and success for our nation’s heroes.”

The VetFran Educational component drills in two main points:

1)  That a franchise is a safe investment for veterans, since all franchises have proven systems and vets are good at following procedures:

“An established franchise business operates on proven systems and defined procedures… This means a veteran can enter a completely new field, and is more likely to succeed…”

 

2)  If a company offers a veterans discount & is a VetFran member, it is “vet-friendly” and can claim to be a “Top Franchise for Veterans.”

VetFran is a hugely influential and powerful presence, permeating nearly every discussion of veterans in franchising.  Google searches for “Vet-friendly franchises” or “Top Franchises for Veterans” overwhelmingly return links to lists, rankings, articles and franchisor marketing either directly or indirectly based on VetFran membership.

Does VetFran Truly Educate & Guide Veterans to “Small Business Ownership, Prosperity and Success”?

Or Does it Set Them Up For Failure & Loss?

While it is a 501(c)3 organization, VetFran is a primarily promotional campaign that serves the interests of its members, who are franchise sellers and commissioned franchise brokers.

Vetfran’s board consists of franchise sellers (16) and those who sell to or for franchise sellers (11), including consultants, an attorney, and franchise brokers.

In 2016, VetFran representatives, including VetFran donor and supporter Gordon Logan (founder of the Sport Clips men’s salon franchise chain), announced that VetFran would begin screening its members for “quality.”

According to the article VetFran Raises the Bar for Veterans:

Starting in 2017, instead of admitting any franchise that offers discounts to veterans, VetFran will require members to meet certain qualifications…

The VetFran committee spent over two years setting these standards.

Gordon Logan, who was immediate past-president of VetFran at the time, told Franchise Times writer Julie Bennett:

It was not an easy battle…

This is the first time the IFA ever had criteria for anything…

Unfortunately, it appears to have been wishful thinking.

Our Review Indicates VetFran Endorses Many High-Failure Rate, High Risk Franchises for Veterans

VetFran claims to have nearly 600 vet-friendly members (We count 483 or so).

Unhappy Franchisee reviewed Franchise Disclosure Documents (FDDs) of more than 100 randomly selected VetFran member franchisors.

We calculated the 3-year Franchisee Turnover Rates for each.

To put these rates in perspective, the FTRs for most large, well-known franchise chains are around 20%  (McDonald’s & Burger King 20%, Chick-Fil-A 10%, KFC 18%, Subway 27%).

Of the 100 we reviewed:

  • 75% of VetFran-endorsed Franchises Have Turnover of 20% or Higher   
  • 42% of VetFran-endorsed Franchises Have Turnover of 30% or Higher
  • 17% of VetFran-endorsed Franchises Have Turnover of 40% or Higher
  • 4% of VetFran-endorsed Franchises Have Turnover of 50% or Higher

3-Year Franchisee Turnover Rates of 15 VetFran-Endorsed Franchises

VetFran Franchise Failures

Source for Citation:  UnhappyFranchisee.Com; compiled from 2021 company FDDs

Some Noteworthy VetFran Recommendations:

United Franchise Group’s Supergreen Solutions & Experimax – 83% & 73% Turnover

Supergreen Solutions is down from 39 locations in 2019 to fewer than 10 today.

Experimax is down from 101 locations in 2019 to 48 currently.

United Franchise Group (UFG) has a pattern of selling franchises of a particular brand (Billboard Connection, Plan Ahead Events, IZON Global Media, Supergreen Solutions) until franchise failures reach a critical point.  It then sells or otherwise sheds the failing franchise brand and repeats the cycle with a new brand and new franchisees.  UFG recently shed Supergreen Solutions and appears to be in the process of shedding Experimax.  Many franchisees of these VetFran endorsed franchises are in bankruptcy and defaultiung on their SBA loans.

United Franchise Group’s AJ Titus is on the VetFran Board.

VetFran-Endorsed Planet Beach has lost 90% of Its Franchises Since 2010

Analysis of Planet Beach FDD’s since 2010 reveal that Planet Beach franchise locations are down from 347 in 2010 to just 43 in 2021.

[Chart]Planet Beach Franchise Turnover 2010-2021  (Includes International)

Year Opened Exited Transfers
Start 347
2010 8 48 9
2011 7 33 14
2012 10 4 21
2013 10 35 10
2014 9 24 17
2015 11 17 15
2016 6 35 12
2017 3 24 7
2018 0 17 7
2019 0 15 9
2020 0 14 2
End 43
Total 411 266 125
Turnover

Rate

90%

Source for Citation:  UnhappyFranchisee.Com; compiled from Planet Beach FDDs

880 Dickey’s Franchises (71%) Have Closed or Changed Owners Since 2007

We analyzed company-prepared Dickey’s Franchise Disclosure Documents. We found that from 2006-2021:

Total number of signed Dickey’s franchise agreements (FAs) 2007-2016:  1551

Total number of Dickey’s franchises that were terminated, closed, reacquired or transitioned to new owner:  532

Percentage of Dickey’s franchises that were terminated, closed, reacquired or transitioned to new owner:  71%

Year   Source: Dickey’s FDDs for 2007, 2010, 2013, 2016/2017, 2021 Dickey’s Franchises Added to 58 established franchises in 2006 Dickey’s Franchises Reported as Closed, Terminated, or Reacquired   Dickey’s Franchises Reportedly Transferred to Different Owners(Churned)
2007 11 10 6
2008 23 6 7
2009 41 18 4
2010 22 18 3
2011 45 11 16
2012 81 3 26
2013 81 14 25
2014 128 13 38
2015 118 23 58
2016 74 28 63
2017

2018

2019

2020

88

72

58

38

73

110

84

73

69

44

60

74

TOTAL 880 484 671
% of all 1551* franchise agreements that closed or transitioned 71%

* 58 locations + 822 opened + 671 added via transfer/resale = 1551. 

Source for Citation:  UnhappyFranchisee.Com; compiled from Dickey’s Barbecue Pit FDDs

Please Share Your Thoughts VIA Comments (below) or Email UnhappyFranchisee[at]Gmail.com

Veterans Appeal to the FTC to Stop Deceptive Practices

Army veteran & former franchisee Jim Lager asks the FTC to ban non-disclosure agreements that keep veterans from hearing, or speaking, the whole story.

Marine Corps veteran Kyle De Santis asks the FTC to stop the predatory targeting of veterans that devastated his businesses and family.

Please Share Your Thoughts VIA Comments (below) or Email UnhappyFranchisee[at]Gmail.com

NOTE TO VETFRAN, IFA, FRANCHISORS & INDIVIDUALS DISCUSSED:  We invite you to provide corrections, clarifications, explanations, rebuttals and alternative interpretations.  We welcome respectful dialogue and rely on it to refine our reporting for accuracy.  We will share submitted on-the-record comments and respect correspondence made off-the-record.

NOTE TO VETERANS & FRANCHISEES:  We welcome your input, experiences & opinions & value your right to confidentiality.  Please email us in confidence or leave a comment below.  Your email address will not appear publicly.

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TAGS: VetFran, International Franchise Association, IFA, Franchise Business Review, Franchises for Vets, Vet-Friendly Franchises, Top Franchises for Veterans, Veteran Transition, Veterans Franchise Warning, franchise, franchise opportunity, franchise complaints, franchise, franchise opportunity, franchise complaints, unhappy franchisee

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