While the majority of enlisted personnel are in their late teens and early 20s, they report for duty on time, properly groomed and attired, with all necessary equipment cleaned and ready to use. They accept orders without argument, completing their assigned tasks quickly and efficiently.

In the civilian world, that same age group may challenge the veteran’s patience, if not more. Teenagers, in particular, often have an entirely different view of the workplace, with far less concern about being on time, personal appearance, or challenging the boss’ orders.

VetFran committee member Chris Loudermilk of The Dwyer Group® says that is one of the first issues he deals with when talking to veterans and new franchisees.

“The hierarchy in your business, which may seem similar to what you had in the military, really isn’t, especially if you have a younger generation coming to work for you,” he says. “I tell them to set out their expectations up front and hold their employees accountable. If someone shows up late, unlike the military, you can’t make them do 50 push-ups, but there must be consequences. So we teach them how small business America does that.”

That also can be an opportunity for veterans to help young civilian workers prepare themselves for real-world work demands they may never have faced in school.

“It will be a bit of a learning curve and there may be days when people not showing up on time or properly dressed make you wonder why you ever went into business, but that is the real world,” warns Miriam L. Brewer, director of education and diversity at the International Franchise Association^® (IFA). “But it also gives you an opportunity to engage them and teach them what it means to have a strong work ethic.”

Former Marine Corps Logistics Captain Mary Kennedy Thompson, a long-time Cookies By Design® franchisee who is now president of Mr. Rooter® plumbing, says veterans must adopt a new mindset, one in which a recalcitrant subordinate cannot simply be sent to the brig.

“I struggled with that transition,” she admits. “I was talking to everyone as if they were the same, but when I let go of my pre-judgments and told people what my expectations were for them to become part of my team, they rose to the occasion.

“Once I was able to see people by what they could be rather than by their appearance, it also helped get me to the place where I needed to be. And don’t forget, some service members also may have been nose-ring wearing, purple-haired, anti-authority types before they joined the military.”

In addition to overseeing more than 400 Mr. Rooter franchises around the world, Thompson is vice chairwoman of the VetFran committee. In both rolls, she tries to convey her lessons learned about moving from military leader to civilian boss to her own franchisees as well as veterans who look to VetFran for help and advice.

High on that list: Make certain your business is run by your standards, even as you strike a balance between your military ethos and civilian realities.

“I remember thinking I would be the cool employer who let them listen to whatever music they wanted, but by day three and the umpteenth Twisted Sister song, I changed my mind and put the radio on the station the customers most wanted to hear,” she recalls.

“And once I put my foot down, I had three employees come up and thank me because it was driving them crazy, too. So follow what you already know, create a strong, customer-centric culture, do the right thing, and you will attract the right kind of people.”

Brewer strongly encourages veterans to take business classes – before leaving the military, if possible – to help them learn how to deal with civilian personnel and personal development issues, including hiring and firing.

She also cautions against taking what might seem the “easy” out, by only hiring other veterans. In addition to losing the opportunity to both learn and teach, she says, “You may be doing yourself and your business a disservice, because the majority of your customers aren’t going to be military.”

When Arnie Habig, a native New Yorker, tells you how he ended up in Arkansas, he makes it sound as if it were an accident – but you can tell from his voice that he thinks he was destined to be there.

In 1957, Habig, along with about 1,200 fellow soldiers in the 101st Airborne Division Battle Group of the Army’s Airborne Division, was ordered by President Dwight D. Eisenhower to ensure the safe escort of nine African-American students – “the Little Rock Nine” – to classes at Little Rock Central High School to enforce the U.S. Supreme Court’s ruling in Brown v. Board of Education. Historic as that deployment was, it had also decided Habig’s own fate within a few days, when he met his future wife at a local club.

After retiring as a full colonel in 1987, Habig settled with his wife in Arkansas and discovered his new passion: Lake Ouachita, a 40,000-acre reservoir created by the Army Corps of Engineers (USACE) in 1953 when Blakely Mountain Dam was completed on the Ouachita River. The lake is in the heart of the Ouachita Mountains, just a dozen miles northwest of Hot Springs, and Habig and his wife spent every spare minute at the lake, usually camping at their favorite spot, Brady Mountain Resort, and sometimes fishing in the lake that is known as the “Striped Bass Capital of the World.” After working for awhile as a fee-taker at the lake, Habig later found a job with the State of Arkansas.

Today, Habig volunteers as chairman of the Lake Ouachita Citizens Focus Committee, a group of local leaders who provide feedback to the USACE about how to enhance the recreational experience at Lake Ouachita and the watershed around it. In the past decade, the committee has relaunched a lakeshore and island cleanup program. It has convinced Congress to fund the eradication of invasive aquatic plants from Lake Ouachita’s waters – still so clean they are home to rare freshwater jellyfish and sponges. It has formed the partnership that continues to develop the Lake Ouachita Vista Trail (affectionately known as the LOVit), an award-winning network that links six resorts, six USACE recreation areas, and two U.S. Forest Service campsites.

“My advice to individuals who are going to get out of the Army is: One, take advantage of the GI Bill. That’s the first thing,” says Habig. “Second, start another career. There are so many jobs for military out there, especially state jobs. The other thing is: Volunteer to do something you really like. And we really like camping at Brady Mountain, so I volunteer at the lake. That’s what I do.”

While Habig and his wife, Jean, live about an hour away from the lake in his wife’s hometown of Little Rock, he says he’s just one of many military people – both active-duty and retired – who use the lake. Little Rock Air Force Base is about 55 miles from the lake, and many Air Force personnel retire to Hot Springs Village, less than a half-hour from Lake Ouachita.

“Most of them come and fish,” Habig says, “because Lake Ouachita is great for fishing. And there are a lot of other lakes around here. If you’re a fisherman or a hunter, and you’re based in Arkansas, you just end up staying here, because it’s a very enjoyable state.”

Corps Lakes Are Everywhere

The southeastern quadrant of the United States is noteworthy for several reasons, but for many military retirees, some appear to be more noteworthy than others – the abundance of military facilities, sunshine, and lakes.

Because the Army Corps of Engineers operates 4,500 recreation sites at its multi-use projects around the country – 80 percent of them within 50 miles of a major metropolitan area – many of these retirees are settling on or near a USACE lake. While some reservoirs, such as Ouachita, are surrounded by national forest land, others offer the opportunity to buy lakefront or lake-view property. All, however, offer a variety of recreational opportunities: boating, fishing, RV or tent camping, hiking, biking, hunting, horseback riding, and more.

There doesn’t seem to be much of a consensus among military personnel who retire on or near Corps lakes about why they chose the area. In central Texas, near the cities of Temple and Killeen, Dave Thomasson is the USACE’s lake manager for neighboring Belton and Stillhouse Hollow lakes. There’s a heavy military presence on both lakes, he says, “And of course, that’s because of the close proximity to Fort Hood. Part of Belton Lake actually is adjacent to the Fort Hood Military Reservation.” While many military retirees live nearby, Thomasson says, “I wouldn’t say they’ve moved here to retire. I think what’s more likely is that a large percentage of those folks were in the military, got out of the military, and then just stayed as younger men. Another thing that tends to draw military retirees to the area is the VA [Department of Veterans Affairs] hospital in Temple, which is about 10 to 20 miles from the lakes. And of course, anywhere you have a VA hospital, you’re going to have a big concentration of retirees.”

Arthur Johnson, a retired Army sergeant first class, spent the last nine years of his 20-year service at Fort Hood before retiring in 2005. He met his wife in the area, and together they bought a home in Morgan’s Point Resort on Belton Lake. Johnson enjoys everything about living on the lake. He owns an RV and camps at one of the lake’s many hookup sites, and has spent countless hours fishing. “It’s a pretty good area here in central Texas to retire to,” he says. “A lot to offer and not too far from anything.”

Johnson also knew, upon retiring, that he didn’t want to merely settle into a life of leisure. He took his lifelong desire to be a teacher and coach at nearby Miller Springs Nature Center, where he worked in a program to help troubled youth develop an appreciation for nature and conservation. It was here that he met a USACE park ranger and learned about the job. Today, he works for the Corps as a park ranger and natural resource specialist at Belton Lake where he’s in charge of the Corps’ public outreach program. At least two of the volunteers who work with him on the program are also retired military service members.

“So I live and work here now,” Johnson says. “I’m on the lake quite a bit as a ranger. I didn’t really know I wanted to do this until after I’d retired. It’s a great job.”

An Everyday Vacation

It often happens that lakeside living is a studied choice for military retirees. When Clint Epley, a former Navy commander, retired from the service, he and his wife had already discussed their retirement spot for years. “She said she wanted to be on a lake,” says Epley. “Not the ocean. A lake.” The Epleys took everything into consideration: taxes, housing, location, and proximity to military bases. “We wanted to be close to a base, but not in a big city,” he says.

When they had both retired, the Epleys went on a 28,800-mile, fact-finding odyssey, driving through all the lower 48 states. “The bottom line was that my wife said, ‘We’re going somewhere where it’s warm all the time.’ And it seemed the place we kept coming back to was the Texas Hill Country,” says Epley.

Today, the Epleys live in a home overlooking Canyon Lake, a USACE reservoir on the Guadalupe River, just 50 miles north of San Antonio and two of its largest military installations – Fort Sam Houston, home of the U.S. Army North, U.S. Army South, and the Army Medical Command; and Randolph Air Force Base, headquarters of the Air Education Training Command and the 12th Flying Training Wing.

According to Epley, they considered another nearby lake, “but we decided we weren’t interested, because it had piers and things jutting out all over the shoreline, and the Corps of Engineers, on this particular lake, doesn’t allow any permanent structures. There are only two public marinas and two marinas set aside for military people. Everything else is free shoreline. We liked that a lot.”

Interestingly, the Epleys were unaware, when they moved in, that other military retires – most from the Army and Air Force – surrounded them. “They moved here because they’d been stationed at Randolph or Lackland [Air Force Base] or one of the bases here, and knew about it,” Epley says, “and just came up here and liked it. And they came back.” Both Fort Sam Houston and Randolph Air Force Base, in fact, lease a portion of Canyon Lake in order to provide recreational facilities – boat rentals, marinas, beaches, even mobile homes – for service members.

Epley worked for a time as an office manager at the Fort Sam Houston Recreation Area – but none of its recreational opportunities seemed to interest Epley, who doesn’t own a boat. Today, he performs volunteer work, while his wife works for the Canyon Lake Area Chamber of Commerce. “For us, the lake is a view,” he says. “As my wife puts it, she feels like we’re on a vacation every time we come home.”

At least one pair of Army retirees – Jeanne Slupik, who retired from the Signal Corps in 1997, and her husband, a former artilleryman – moved to Canyon Lake from elsewhere. They met, says Jeanne, while serving in Germany, but had always kept their eyes on Canyon Lake. “My parents lived in San Antonio,” she says, “and we had other friends who had built their homes out at Canyon Lake. We wanted to be near the water, because we planned on jet skiing a lot.”

After buying a 5-acre lot, the Slupiks became enthusiastic lake dwellers; their home had a third garage space built specifically for their pontoon boat. “We have a panoramic view of Canyon Lake,” she says, “right over the dam. The yacht club is just on the other side of one of the hills, so we can see all the sailboats.” She spends many mornings walking across Canyon Dam with her sister – “A nice mile-long walk,” she says – but they don’t do much jet-skiing anymore, and the area is great for fishing, or so she hears. “We have trout in the Guadalupe River, and we have catfish and bass in the lake, but we don’t fish. I married the ultimate non-sportsman.”

For the Slupiks, an added bonus to living on Canyon Lake is the proximity to Brooke Army Medical Center, in San Antonio, which they both use as military retirees. But while they enjoy being close to family, the medical center, and a local population that is unfailingly appreciative of their service, neither of the Slupiks spends much time with other military retirees. “We do have a VFW [Veterans of Foreign Wars] post here,” she says, “but the majority of our friends are not military, and our prior lives are not the focus here. We had a life in the military, and the military was very good to us. But it’s not part of who we are today.”

Today, the Slupiks continue to enjoy introducing their many friends to Canyon Lake. “I still enjoy it,” she says. “I host a function every August that I call ‘Breakfast on the Deck.’ I bring all my friends out on the deck – because you want to be on my deck in the morning, not in the afternoon. And we just look at the view. When people come to visit, I can’t get them off the deck.”

That’s because alternative learning is the wave for adult students in 2010. It’s a rare university these days that doesn’t offer online courses – Penn State University’s World Campus currently boasts 9,600 enrollees, with that number increasing by 37 percent annually to take the 537 courses in 62 programs. AMR Research, in Stamford, Conn., which was recently acquired by Gartner, Inc., ranks its Smeal College of Business as having the best supply-chain program in the United States, and the school is also a winner of the Sloan-Consortium Most Outstanding Online Teaching and Learning Program for the Basic and Advanced Certificates in Turfgrass Management and bachelor’s of science degrees.

Distance learning is so big now that the Transparency by Design initiative’s Web site helps adult learners compare outcomes and determine student performance across programs.

Meanwhile, the Defense Activity for Non-Traditional Education Support (DANTES) has tapped Hezel Associates to study the effectiveness of mobile learning – e.g., courses via iPod®/iPhone® and Blackberries®. Early-phase studies show that the percentage of military students who complete mobile courses are much higher than civilian students taking the same course online at the University of West Florida and Coastline Community College. We’re talking 91 percent to 72 percent, a 21-point difference in favor of learning via phone.

It was enough for Hezel to recommend DANTES continue to probe the mobile possibilities in the future.

Among the tools that landed Excelsior College in Albany, N.Y., among the top 10 military friendly schools in America: lessons on CD-ROM. “They work very well for service members who were deployed and don’t have Internet connections,” points out Sue Dewan, executive director of the Center for Military Education there. She’s obviously on to something: Excelsior College military students have a course completion rate of 95 percent, the highest among various student groups – and it just launched a degree in Bachelor of Professional Studies in Business and Management March 1, 2010.

Other colleges, such as American Military University headquartered in Charles Town, W.Va., are open to the idea of pre-loaded hand-loaded devices to address the problem of downloading materials while in a war zone. Others, such as Colorado Technical University, ships books via military post five weeks before a distance learning class begins as an alternative to its cell phone download app.

Still, one thing remains the same: Too many students lack confidence in their academic abilities, regardless of the changing landscape, says Josh Salcman, president of Virtual Nerd, LLC, in St. Louis, Mo. His advice: Try it anyhow. “You can ask the same question 20 times and no one cares,” he notes. “The ‘I’m supposed to know this’ pressure doesn’t come into play online if no one is watching, so ask your questions without embarrassment.”

Anyone considering a franchise business has a number of questions that must be asked and answered. One of the most important is whether to buy a new start-up franchise directly from the franchising corporation or an existing business from a franchisee who has decided to sell.

Due diligence, the use of franchise consultants and attorneys, and financing needs are common to both. But each approach has its own set of pros and cons the franchise candidate must assess to determine what is the best fit for him or her – not only from an up-front cost perspective, but also in terms of personal goals and capabilities.

“If the franchise is a fit for this person and personality and what they want for a business, then I would recommend looking at both a new and an existing franchise, and the pluses and minuses for both,” says franchise consultant Anne Barr, CFE, president of Franchise Opportunity Specialist in Dallas, Texas.

Former St. Louis, Mo., franchise consultant Charles W. Barron says the biggest consideration almost always involves cost – an existing franchise will require more cash up front, but the franchisee steps into an ongoing cash flow, where it typically takes several months – even a year or more – for a new franchise to start showing a profit. But just determining an actual cost comparison can be tricky.

“It might seem best to buy a new franchise to get the start-up help the franchisor provides. But the extra money you are going to put into your initial marketing will increase the amount of money you will need,” he says. “With an existing franchise, instead of having a franchise fee of, say, $50,000, plus another $40,000 for working capital and marketing, it could cost you $250,000. The bottom line is: Do you have the money and desire to go into something that already has an income to support that higher investment?”

Those numbers are strictly illustrative, Barron says – the actual cost of a new franchise varies widely by industry and company. By law, franchisors must charge the same fee to everyone buying a new franchise, while an existing business price is based on actual performance, which is influenced by a number of factors, especially location.

“Typically, existing businesses – including running franchises – sell based on earnings and cash flow. Not net profit, but the piece of the pie left after all business expenses have been paid,” Barr explains. “When you own your own business, you run your car, health insurance, life insurance, and all kinds of things through that business and the IRS says that’s OK.

“But what we’re really looking for is how much cash does the owner have to work with, because businesses are priced based on a multiple of that number. Retail and food businesses are somewhere between one and two times, service businesses two to four times, manufacturing four to six times. There is an added intangible value to a franchise, however, so they usually bring a higher price.”

In either case, the new owner will receive initial support and training from the franchisor, although that may differ somewhat between new and existing franchises.

“If you buy an existing business, you will still get the training for yourself, although your existing employees probably would know more than you at the start,” Barron says. “The franchisor also will still provide some marketing support, but it will be less intense because, hopefully, you bought a successful franchise. Basically, it depends on the individual. If someone is very entrepreneurial and loves to build, then a new franchise is best. But if you have someone who doesn’t need to do that, then an existing franchise is the way to go.

“When you buy a franchise, you are really buying an operating manual that will save you money in the long run. With an existing franchise, everything is in place, it is finely tuned – if successful – and you can go to bed at night and sleep. If you [have] only enough money to buy a new franchise, as long as you follow the franchisor’s instructions and have the money for marketing, you should be OK.”

An established business offers a number of benefits beyond an ongoing income stream, including in-place vendors and experienced staff, an existing customer base, an established location and lease (if needed), and actual performance records rather than mere projections. As part of due diligence, the prospective buyer also needs to ask – and verify – why the owner is selling. If the reasons are not related to a business problem the buyer will inherit, then the current owner becomes an excellent source of information, including problems already encountered and solutions implemented.

With an existing business, however, the potential buyer has to look beyond what is offered up front to entice buyers, regardless of the reasons given for selling the business.

“You have to ask for audited financials, no matter what you’re buying. If they can’t or won’t provide audited financials, run. Because without those, you don’t have an independent outsider validating how well the business is being run,” Barron warns.

It also is important to look at information the franchisor is required by law to provide to every prospective franchisee, whether buying a new or existing business.

“Every franchisor has to give a Franchise Disclosure Document [FDD] to every prospective franchisee. It shows all existing franchises and, for the last year prior to publication, the people who have left the business and their contact information. That is a huge, huge thing,” he says.

All other factors aside, the final decision on new versus existing depends on each individual veteran’s skills and desires, adds Tonya Destarac, CEO of Cobalt Business Solutions, a Denver, Colo.-based firm that provides supplementary training and systems to the 20 percent of franchisees who find themselves struggling to survive.

“There’s really no right or wrong way and there are benefits to both approaches. So veterans first have to identify their own skills and how they want to develop themselves in building their businesses,” she says. “That makes it a personal and individual choice.

“A brand new franchise affords the opportunity to build it the way they want it, with their vision and their goals, rather like moving up through the ranks and building their skills progressively. Buying an existing franchise is more like taking over an existing command, which requires more immediate skills to succeed. That also has a steeper learning curve. And it depends a lot [on] whether the veteran has managed people in the past.”

But each consideration a veteran makes about which business to get into, which franchisor to go with, where to locate, and whether to buy a new or existing franchise inevitably bounces off every other consideration. Timing, location, individual motivation, whether to be a hands-on owner or a behind-the-scenes manager, franchisor requirements on how much time and effort the owner must put into the business, etc., can – and often do – change the potential franchisee’s decisions and directions.

“In either case, you need to do a lot of research. The last thing you want to do is walk into something that is not well structured when you are inexperienced yourself,” Destarac says, adding that is not a one-man job, but should include the use of franchise consultants and attorneys, CPAs [Certified Public Accountants], financing specialists, interviews with other franchisees – including those the FDD shows have left the business in the past year – the Better Business Bureau^®, the U.S. Small Business Administration, and the Veteran Affairs’s Center for Veterans Enterprise.

“It really boils down to what kind of lifestyle you have – and want – and how much money you have in the bank, both to invest and to fall back on. So it’s really personal preference – but personal preference based on skills, dreams, and desires.”

Former Army chaplain Jim Williams, who has owned seven franchises – both new and existing – with three different companies since 1971, agrees, saying the choice “depends on the amount of capital – physical, emotional, and fiscal – you are willing to invest.

“Starting from scratch requires more than taking over an existing business, where the risk factor goes down significantly,” he says. “Depending on which way you go, you come at it with a whole different set of financial expectations, depending on the size of the franchise.”

In the end, however, after all the due diligence and cost evaluations, all the psychological analysis and market analysis, Barr says deciding on a franchise – from the specific business to the specific company to whether to buy new or existing – comes down to “the gut thing.

“Most people make major decisions based on emotion, then justify them with the facts. You can’t take the emotion out of it. There’s no way. How many people have ever gotten married or bought a house without emotion?” she concludes.

“Is there a time or place to justify an emotional decision with the facts? You bet. Some personalities will try to make the decision based on facts and keep emotion out, but, in reality, emotion will lead to their final decision.”

There are many ways to structure a franchise purchase. Taking on silent investors – usually friends or family – who get a higher rate of return on their money, but do not participate in franchise operations, is one way. Another common model is when multiple investors are also working partners in the franchise. Although the latter is a more complicated arrangement, it has been the key to success for many well-known franchise systems:  TWO MEN AND A TRUCK® started in the early 1980s as a way for two high school brothers to make extra money – 20 years later, the company has grown to more than 200 locations worldwide.

When buying a franchise, the decision to bring an outside partner in as an investor and actual owner – whether friends or family – is ultimately up to the franchisor. In some cases, this approach is not necessary because the corporate office can carry the loan for new franchisees so they do not have to scramble for outside funding. When franchisors consider helping prospective franchisee candidates, they look at several financial criteria including liquid capital, total amount of investment, and overall net worth.

Less formally, many potential franchisees rely on personal connections to supplement their franchise purchase. As the economy continues to wobble, this shoe box approach becomes even more common as franchise candidates are forced to find more creative ways to scrape together the initial investment and start-up costs that can easily reach six figures, says Betty Otte, advisory council member and district director for SCORE_®, Counselors to America’s Small Business, and a former owner of 22 franchise units.

Whether it’s a best buddy, or your parents, Otte says, nothing should be different about the business development process, including presenting the lender with legally binding documentation.

“It’s the same process – you start with a strong business plan and prove to the person lending you money that you have the means to pay them back, just like you would with a financial institution,” Otte says, adding that she does not recommend including small equity partners in the investment strategy. “If somebody lends money, they need to insist on signing a loan agreement and business plan.”

Tools for success
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That’s because it’s not a simple matter of having the money withdrawn before you touch it and settling your account on April 15, as individuals do, says Barbara Weltman, author of J.K. Lasser’s Small Business Taxes. Instead, you pay estimated taxes four times a year, essentially guessing what you think you will owe.

That’s for your personal income side. Business owners with employees bear a tremendous responsibility at federal and state levels; the first step is collecting their information to determine the amount to withhold from their paychecks every pay period. Those funds need to be deposited in an account to submit to the IRS quarterly, along with the employee’s share of Federal Insurance Contributions Act (FICA) for Social Security and Medicare.

Don’t forget, you’ll need to add your employer share of the FICA amount to the final total, too.

As the employer, you also need to pay federal unemployment insurance to Washington, D.C., along with any state unemployment requirements that may be leveled where you live. Uncle Sam lets you pay this annually if you have fewer than eight employees. If your bill increases above $500 a quarter, you have to deposit this money in the nation’s coffers four times a year, too – on dates that do not correspond with other tax deadlines.

Wait, you’re not done.

Unless you locate your franchise in a state that doesn’t apply a sales tax, you must collect those funds for the products you sell. Again, you are on the hook to deposit this money according to your state’s payment schedule.

With all these various payments due, the biggest mistake many franchise owners make in Weltman’s experience is to lump this money with sales income and assume they’ll pay from cash flow. “Many businesses figure, ‘Well, I’ve incorporated, I have personal liability insurance protection if I fail to pay,’” she notes. However, screw up on the trust fund taxes you hold on others’ behalf, and the policy can’t save you. Owners, says Weltman, are still on the hook 100 percent for that money.

Ditto if you trust a payroll company that lets you down, so choose wisely. “There are reported cases of payroll companies that collect the money from a business and then don’t make the deposits with the government. You’re out the money you paid them and you still owe the taxes,” she says.

The second biggest bugaboo is erroneous guesses on the estimated taxes. “In fact, 60 percent of self-employed people are not estimated-tax compliant,” Weltman says. “They wind up paying interest and penalties.” Tax-Aside™, a new online tool, is now available to help with this exercise, and it automates the set-aside, holds the money in an interest-bearing account, and transfers the money at tax time to the Treasury.

“People hate to talk about taxes, but you need to make taxes part of your good business practice,” she warns.

Sure, your restaurant franchise package will include an insurance policy for its newest unit – that’s one of the business-in-a-box advantages that the franchise headquarters will tie neatly with a bow.

It’s typically a good deal, assures Janice M. Dwyer, CFE, president of the Affinity Group Division of the law firm Luce, Smith & Scott, Inc., in Cleveland, Ohio. For one thing, the executives know what it takes to operate a restaurant properly and have done their due diligence to anticipate your exposures. The franchise has the clout to command good pricing. And it is working with brokers who are experts in restaurant insurance, not just general business insurance coverage.

But that doesn’t mean you stash the policy in a file cabinet and walk away, either, Dwyer warns. “Franchisors always take the minimum insurance requirements, to protect the franchisor’s interest,” she points out. “Franchisors will not demand insurance that has nothing to do with them.”

In other words, you could still find yourself hanging out on a limb, despite the policy paperwork you can produce. And you’ll hear it when it hurts the most. “One thing about insurance: It’s the last thing you want to use because it means there’s been a disruption to your business,” Dwyer says.

Unfortunately, the average restaurant owner finds unraveling insurance policies a steep learning curve, says David Orberson, director of operations and claims at Risk Services Corp. in Louisville, Ky., which covers Papa John’s International, Inc., among other franchises. Frankly, it’s not your personal homeowners coverage you’re staring at here.

The Franchise Foundation
Franchisors’ basic policies will cover liability, typically starting with $1 million as a minimum, and require an umbrella (aka extra coverage for the what-ifs in life) of $1 million to $5 million. The restaurant’s headquarters will also pre-negotiate employment practices’ liability to cover its franchisees in case employees sue them for harassment, discrimination, or other employment-related suits. And many times, Dwyer says, business interruption coverage is mandatory, as this pays the loss of earnings should you shut down. In turn, you can stay current with royalty payments and any franchisee fees due.

If your restaurant offers delivery service, the franchisor wants to see that you have $1 million in automobile coverage, with the franchisor named as an additional insurer on the policy.

And that, in a nutshell, complies with most restaurant franchise responsibilities, says Dwyer.

But even this strong foundation can have weak crossbeams. For instance, an umbrella policy “follows form,” as insurance agents like to say, which means if you don’t have coverage down at the general liability policy level, the umbrella won’t cover it either. So you can’t turn down foodborne-illness protection, for example, and assume the umbrella will cover you should someone find themselves violently ill from your lettuce.

So, it’s in a franchisee’s best interests to explore deeper into these areas of insurance details:

• Fire Legal Liability
If a fire starts in your kitchen and burns down the strip mall, who foots that bill? For that matter, who is financially responsible if you save the structure but the resulting smoke damages your retail neighbor’s inventory? Too many franchise owners assume the landlord’s insurance kicks in for these unfortunate moments.

Sorry – your restaurant is the one on the hot seat.

And until you understand the full picture of what you’re expected to pay, the $50,000 default policy looks good. Don’t be lulled into going cheap in this area, advises Georgianna Stump, CIC, CRM, senior director at Risk Services Corp. After 20 years in this industry, she suggests restaurant owners go for $1 million in coverage.

• Employee Benefits Liability
Paperwork becomes the bane in every business owner’s life at some point – even for the most organized. Employee benefits liability covers you should you forget to include an employee on the health insurance rolls – and it comes to light after that person is in ICU after a heart attack – or your check fails to reach Aetna® in the mail and your manager delivers her baby that week. In both cases, you’re squirming on the hook to make things right financially, not the health insurer.

• Defense Coverage
It’s an emotional roller coaster when an ill employee discovers he doesn’t have health insurance after all, so in today’s sue-happy environment, your overlooked paperwork can land you in court as well. Defense coverage helps pay those legal fees. It also comes in handy if the problem that triggered legal action lies with a vendor, because you still want your own lawyer by your side in the courtroom.

• Food Contamination Coverage
Food spoilage is an industry hazard, and restaurant owners, for the most part, can rely on normal product liability coverage to handle their cost should a diner become ill and need medical attention.

But if the hysterical mom of a child recovering from salmonellosis calls the local news team to stand in your parking lot and speculate what happened – even though the family also ate at the Chinese buffet down the street – you need a foodborne-illness policy. The nice thing about this coverage is that it’s not merely a check in the mail. According to Orberson, this coverage accesses a media specialist who helps you field the media circus – and you can count on the company to pay for lost business until the public calms down.

It gets even better for franchisees, Dwyer adds. The policy should take effect if your colleague in the chain has a tainted food item that creates bad press and causes your business to lose income by association. “You’re in an unusual type of risk,” she notes, “because if Wendy’s® across town goes down, you know it will affect everyone in the system regionally and maybe nationally.”

• Payment Card Security Coverage
Credit card processing is a requirement for franchise restaurants these days. Should those encrypted numbers you swipe through the reader at the register land in a hacker’s hands, the law says you have to notify everyone affected, and then get right with the regulation authorities to prove you fixed the glitch. Stump has seen instances where the tab for the notification step alone came to several thousand dollars.

But payment card security doesn’t just pay that expense – it also covers your cost to win back customers. So if you send everyone in your database a $5 coupon or gift card, that’s essentially courtesy of the insurance policy. It’s also got your back for late payment fees should the credit card issuers freeze your cash flow and hold penalties and expenses from your receivables account.

Believe it or not, the costs don’t stop there in this bad-news scenario. If investigators determine the breach is your fault, you’re in line for fines, and staring down at a hefty bill to upgrade and certify your software systems now meet current payment card industry standards.

It’s not cheap being up to snuff, but it is possible with an insurance policy to cover these unexpected expenses.

• Liquor Liability
Does your franchise sell liquor? Then you need specialty coverage to protect your business from dram shop laws. This is an area the franchisor surely will include in the basic insurance requirements, Dwyer says, but do your own math. The standard $1 million or $2 million coverage may not be adequate for your situation. Be warned: This is one of the pricier liability areas restaurant owners have to cover, with premiums starting at $2,500.

But overall, adding these six extensions and policies won’t break your bank, she assures. Many times a franchisee is looking at an extra $50 to $100 on the year, if that. More restaurant owners lack this coverage because they aren’t aware it exists rather than affordability issues, experts say.

Army Staff Sgts. Abel Herrera and Jonathan Goodier both planned to be career soldiers – to serve at least 20 years in the Army, and then retire. Unfortunately, each had his career recently cut short by an injury. Goodier, a cavalry scout, and Herrera, an infantryman, were told they would not be able to continue with their active-duty service. Each was facing a medical discharge.

For Goodier, it was a shock. “My mindset at the time,” he says, “was, ‘Hey, I’m going back into the Army.’ And they told me, ‘No, you’re not. You’re going home.’”

Disappointed, each quickly surveyed his options. “My unit kind of gave me a choice – either go to school or get a job,” says Herrera. “I didn’t want to go to school, and I didn’t want to work on post [at Fort Hood Military Reservation near Killeen, Texas]. I wanted to expand my horizons.”

Herrera knew it wasn’t the best time, economically, to be looking for work. “I have seen many great people in the military get out for many different reasons, and I can say that I only know of a few who actually had some kind of job lined up for them,” he says. “And when you get hurt 10 or 12 years into your career, and the Army decides you’re no longer an asset, that kind of throws a monkey wrench into your plan. … For the most part, if people don’t have jobs already lined up, working with their families or just knowing the right people at the right time, it’s kind of hard getting a job, especially now.”

Through different channels, however, Herrera and Goodier learned of a pilot program being launched by the U.S. Internal Revenue Service (IRS) at its offices in Austin, Texas, the Warrior Intern Program, which offers work internships designed to develop the career skills of injured military veterans, while addressing veteran-specific issues in the workplace.

Given the way he has seen other veterans struggle, Herrera says, he jumped at the chance to work and learn new skills. “To have something like this thrown at you, where you have to change your whole career plan, it’s kind of scary,” he says. “I saw this as the opportunity of a lifetime.

“My case manager at the time was the one that turned me on to it,” says Goodier, “to try it out and see if I can get some more job skills. … I decided to try out the internship and see where I could go with it.”

The Austin Pilot
The pilot program was established in November 2009 with 10 interns: Herrera, Goodier, and eight others. Chip Hollimon, manager of the IRS’ veteran recruitment program, describes the pilot as a four- to six-month internship, sponsored by the Army, to help veterans transition into the civilian workplace while providing the IRS with experienced and skilled individuals. While the hope is that some interns will eventually choose a career with the IRS, it isn’t necessarily the goal.

Participants in the program are selected from the Army’s Warrior Transition Units, which are tasked with helping service members re-enter civilian life after medical discharges. Because the interns are still on active duty, the internships are non-paid positions. The interns practice skill-sets that range from clerical to administrative, with the potential to transfer to other business units within the IRS. Right now, most of the program work is focused on the Austin call center. Herrera and Goodier are working in the examination department, performing a variety of tasks, from sorting mail to assigned cases. “They’ve pretty much got us involved in just about everything,” Herrera says.

“The program is flexible enough to allow for customization for each intern,” Hollimon says. “This is necessary, as many of the interns are still recovering from injuries and have pending medical appointments. In order to provide maximum benefit and training opportunities, it just makes sense to not have a rigid structure.”

The Austin Pilot has partnered with the Military Outreach for Service-Internal Revenue Service (MOS-IRS), an employee organization that supports military veterans. The MOS-IRS has matched intern participants with IRS mentors who help the interns develop both a big-picture view of the IRS’ work and ideas about how to grow an IRS career.

For Herrera, the relationships he’s developed – particularly with his mentor Rodney Kobayashi, a retired Army major general and IRS territory manager, and with Linda Ortiz, a manager who serves as a kind of IRS/Army liaison for the program – have been among the best things about participating in the program. “Rodney Kobayashi has helped me tremendously with this journey,” he says. “And Ms. Ortiz has been more than helpful. She gives us more attention than we deserve, I think. She’s pretty dedicated to her job.”

One of the most surprising things about the program for Goodier, he says, was learning about the variety of job titles within the organization. “Everybody has the mindset that the IRS is just a bunch of suits and that you have to know accounting to work here,” he says. “But there are so many different branches of the IRS that you don’t have to do just one thing.”

The Future Looks Bright
The Warrior Intern Program is a small part of the IRS’ overall veteran recruitment program, which is part of a government-wide initiative to increase hiring and retention of veterans throughout all federal bureaus. IRS Commissioner Doug Shulman, committed to making the IRS an “employer of choice” for veterans, has thrown the full weight of the agency behind the program, providing support from the IRS Human Capital Office, the IRS Recruitment Office, the Austin Employment Office, and the Wage & Investment Division in Austin.

The IRS has its own training program for managers in hiring, using existing hiring flexibilities to create veteran-specific opportunities in areas such as contract management, investigations, physical security, training support, and program analysis. “Our goal,” says Hollimon, “is to provide a career, not just a job, with the potential for upward mobility.” To date, the IRS has been remarkably successful in attracting military veterans; in 2009, veterans represented about 10 percent of the IRS’ new employees.

Service members who want to find out more about the program, says Hollimon, should tell the case manager in their Warrior Transition Unit. “I definitely would want everyone to come to the IRS program,” he says, “but many different agencies will be starting, if they have not already started, a Wounded Warrior Internship Program opportunity.”

Hollimon says the Austin Pilot of the IRS’ Warrior Intern Program has been a promising start, drawing interest from case managers and other service members. Three of the interns have already “graduated” from the program – two of whom, upon the completion of their medical discharges, have begun their new careers with the IRS.

Given the success of the Austin Pilot, the IRS is planning a second phase, to be initiated in June 2010, with up to 10 interns at the IRS’ San Antonio, Texas, facilities. “We’re very excited about the success of this program,” says Hollimon. “If we’re able to make it a permanent program, we will expand incrementally across the nation. Our intent is to properly match each wounded warrior with training positions that enable them to become competitive for full-time employment. The best approach would be to model the Austin and San Antonio programs deliberately and incrementally.”

To date, Herrera is undecided on his future – though he considers the program, along with his service, to have made him much more marketable to potential employers, he’s not sure whether he’ll end up in the public or private sector. “I know that the IRS is a great organization, and I would love to be part of it,” he says. “With that said, I am an infantry soldier with a lot of leadership and technical skills. I know there are a lot more agencies out there that would love to put my skills to work.”

Goodier, on the other hand, has specific plans: to move to the Dallas, Texas, area and work in the IRS’ Farmers Branch Finance Department to work with its equal employment opportunity program to promote equality and diversity.

“The program is going great,” he says. “It has taught me many new skills, and has given me new insight on how to cope and adapt to the civilian world. The people I’m working with in the Warrior Transition Unit have been great in helping all of us. I do plan on making the IRS my new career and continuing to serve my country – just in a different role.”