Developing Franchise Frameworks for Military Veterans: A Corporate Analysis

Every year, thousands of Malaysian veterans are discharged honorably. Various training schemes have been introduced to prep up the veterans with skills and knowledge. The aim of those schemes is to allow them to earn decent incomes once they leave the service. In developed countries, military veteran initiatives have been introduced by many franchisors as efforts to help them restart their civilian life. This paper presents a proposed franchise framework on recruiting military veterans as franchisees in Malaysia. Over 600 franchise systems of United States franchisor companies have incorporated the veterans initiatives for franchise opportunity. A content analysis of 50 top best franchisors companies with veterans initiatives generates three core structures of veterans initiatives including financial incentives, corporate support and training. A descriptive analysis is also reported to characterize the dataset. Further, the findings recommend an inclusion of policy relating to veterans initiatives by the government to encourage the franchise players to participate in extending assistance to the veterans. The practical implication of this study provides a fundamental guideline for the franchise industry in Malaysia to design their own veterans initiatives frameworks. ARTICLE INFORMATION Received: 26 July 2019 Revised: 12 August 2019 Accepted: 25 August 2019 DOI: 10.31580/ijer.v2i3.901


INTRODUCTION
Franchise business model has been known to provide systematic assistance and support to many small enterprises in expanding their business domestically and internationally. As known to many, the history of franchise system begun in the U.S. after the World War II. The idea of creating franchise system as an effective way to expand business started with an observation of opportunities emerged from the return of thousands of military veterans. As part of the system, human capital empowers the franchise growth rapidly. In the U.S, it was reported that every year thousands of veterans were discharged honorably. These veterans were struggling to survive outside the military system and support. It is reported by the U.S. Bureau of Statistics that more than 370,000 veterans are unemployed. While the government has a role to play in supporting these veterans, corporate sector is also encouraged to assist them. Without a sound support system from the corporate sector, these veterans are exposed to various social and financial problems. Malaysia experiences similar issues relating to the re-employment of veterans. Malaysian Government has made a call to the private sectors to engage the veterans into their corporate business structures. One of the efforts is to have a veteran initiative being incorporated into the franchising system. Currently, franchise companies in Malaysia offer the public to buy their franchising system at their own terms and conditions which includes all the recruitment requirements. This paper presents findings from a corporate analysis performed on top 50 U.S. franchising firms that have embraced a scheme for military veterans. The findings are reflected in recommending three core structures of military veterans initiatives into Malaysian franchising system. As far as this study is concerned, the scope of this study is only limited to both U.S. and Malaysia context. The objectives of this study are twofold: to identify the core components of veteran initiatives from the U.S. VetFran frameworks and to develop a franchise corporate framework in recruiting veterans as their franchisees in Malaysian franchising system.

LITERATURE REVIEW
Under this section, a theoretical framework of agency theory is explained and followed by a review of literature on the main components in this study including franchising, franchise disclosure document, military veterans, and honorable discharge. Evidently, franchise business model is a successful route to start a new life changing experience for many people. One of the advantages of operating a franchise, compared to the independent business, is apparently because of its proven models designed by people to be run by people. The backbone of a rewarding franchise is strongly supported by the franchisees recruited within the system. This study relies on agency theory in aligning the balance of interests vested in both franchisors and franchisees. This agency theory in franchising was first coined by Lafontaine (1992). In this theory, franchisors and franchisees will share the similar objectives, that is to gain profit through principal-agent relationship in business. Both principal-agent also responsible to share the business risks. The principal will provide a business framework, either product franchising and business-format franchising (U.S. SBA, 2016) and offers to the franchisees to operate the business according to the format given by the franchisors. Under this theory, the agent agrees to makes some types of payments to the principal in return of enjoying all the privileges as an agent. During the starting phase of a franchise 5 business, a consistent support and training from the franchisors companies are vital. If the franchisors fail to provide this support, it may lead to franchisees' dissatisfaction and further will cause their relationship to collapse (Justis & Judd, 1989). This principal-agent relationship is governed by contractual agreements where all terms and conditions are prepared by the principal with the intention to protect the principal's interest and at the same time, allow the agent to make profits and enjoy other benefits.
The history of franchising in the U.S. started in 1840s with the franchising business model used by Cyrus McCormick, as he wanted to increase the sale and distribution of his reapers (Haulk, 2015). The U.S Census Bureau (2012) reported that franchise industry has employed more than 6 million people. Because franchise exists with the idea of giving back to the returning military veterans, the scheme of military veterans initiatives was pioneered in the United States by Don Dwyer Sr in 1991(VetFran, 2019. Approximately more than 19 million military veterans are reportedly still alive in the United States (National Center for Veterans Analysis and Statistics, 2016). It is also reported that in 2012 survey, unemployed military veterans were at 7% compared with 7.8% U.S. unemployment rate (ConsumerCredit.com, 2012). A recent survey done by VetFran stated that 99% of franchisors think veterans are a good fit to their franchising system and 97% veterans were rated as excellent franchisees. In effort to help them get back on their life and earn decent income, the veteran initiatives are exclusively designed to prep up the military veterans into civilian economy.
According to a report by the U.S. Small Business Association, one in eight franchises in America are owned by a veteran. More than 2.5 million U.S franchises are operated and owned by the military veterans, who have been discharged honorably, under the scheme. There are 2.5 million U.S. businesses that are owned by veterans and making up about 9 percent of all businesses in the U.S. From these business entities, they employ more than 5.8 million people and pay more than $210 billion in employees' wages. These are the promising results of veteran initiatives introduced years ago.
On the other hand, Malaysia has more than 450 new franchises operating in 2013. A tremendous increase of franchised units totaling of 6,000 outlets were opened in 2014 (Franchise Daily, 2016). In 2015, the franchising industry generated more than RM26 billion (The Star, 2015). Under Malaysian Budget 2019, the government has allocated RM5.5 million to boost the development of franchise industry. Perbadanan Nasional Berhad (PNS), as a government linked company incorporated under the Ministry of Finance (MOF), is mandated by Ministry of Domestic Trade and Consumer Affairs (MDTCA), to champion the development of franchise industry in Malaysia. Two primary financing schemes offered are Franchise Financing Scheme (FFS) and Small Franchise Financing Scheme (SFFS), which allocates up to RM1,000,000 and RM50,000 for loans respectively. For those small business owners who plan to expand their businesses into franchising, Franchise Development Assistance Fund is available up to RM100,000 in the form of grants. All schemes and grants require the applicants (either franchisor or franchisee) to meet specific criteria to be eligible to apply for the funds. One of the criteria is that the applicant's company must be Bumiputera (a Malaysian of indigenous Malay origin). The inclusion of Bumiputera's participation in many economy activities have been practiced through a numbers of government policies, with the intention to provide a continuous assistance to those who are eligible.
In line with a call from Malaysian 7th Prime Minister, Tun Mahathir Mohamad, encouraging the private sector to extend their helps by giving more career opportunities to the military veterans. This move, according to Tun Mahathir, will benefit the private sector because the veterans have a diverse knowledge and experience ranging from food service management to aerospace (MalaysiaKini, 2018). The support from the private sector in recruiting the veterans into their establishments will promote the wellbeing of the veterans economically and socially. Malaysian Armed Forces (ATM) Veteran Affairs Department director-general Dzulkarnain Ahmad said recently that many government programs, including job replacement and industrial training, require proactive participation from the private sector and the government-linked companies in order to improve the socio-economy of the veterans (MalaysiaKini, 2019). To broaden the job opportunities for the veterans, the military veterans initiatives must be introduced as part of the policies in franchise development scheme.
In Malaysia, thousands of military veterans were discharged honorably every year. Military affairs are governed by its own regulations. All servicemen and ex-servicemen are subject to its code of conduct. In the U.S., a veteran is a person who served in the active military, naval, or air service, and who was discharged or released therefrom under conditions other than dishonorable (U.S. Code Title 38). In reference to Malaysian Veteran Act 2012, Section 2 defines veteran as 'a Malaysian citizen who has served full time and has not been retired or discharged from service on grounds of misconduct in any regular forces of the Malaysian Armed Forces, volunteer forces mobilized full time by the Malaysian Armed Forces regardless of length of service, Force 136, British Forces who served in Malaya, Malaysia or Singapore and Sarawak Rangers'. Malaysian Veterans Act 2012 does not define any act amounting to dishonorable discharge. The Act only stated veterans who have not been retired or discharged due to misconduct during the service term. Table 1 outlines the number of veterans being discharged from year 2011 until year 2017 in Malaysia (Department of Veterans Affair, 2018). As of today, approximately 460,000 veterans are registered and on average of 5,000 military officials leave service annually. Unfortunately, there is no data available indicating the participation of Malaysian veteran in franchise business. Department of Veterans Affairs (DVA) is a working body under the administration of the Ministry of Defence Malaysia and manages the affairs of Malaysian Armed Forces veterans after completing their service. One of the DVA objectives is to provide necessary assistance to the veterans who need to resettle their lives into civilian ecosystem. According to the DVA database, there are several numbers of transition and training programs offered to the veterans as effort to enhance their socioeconomy. Those scheduled programs are including basic business management, agriculture, and entrepreneurship.
Policy, as defined by Merriam-Webster Online Dictionary (Merriam-Webster.com, 2019), is a high-level overall plan embracing the general goals and acceptable procedures especially of a governmental body. Implementing policy is aimed at a specific group of interest to address a focused issue. The different between laws and policies are that changes in laws will take longer time to get passed by the lawmakers. While policies could be passed at ministerial or agency level where the implementation is in entirety. In order to provide guideline to the franchise industry relating to the veteran initiatives and to show support from government front in promoting those initiatives, the government must introduce policy to ensure that the franchise industry embraces the initiatives.

METHODOLOGY
There are two phases of data collection completed in this study. In the first instant, the data was obtained from the U.S. International Franchise Association (IFA) website and next, the data was collected from Military Times Best website. This study used a list of U.S. franchisor companies which are registered under VetFran. VetFran is a class of franchise companies who designed their own veteran initiatives structures and implement those veteran initiatives in their 6 franchise systems. As of March 2019, a total of 593 franchisors registered in VetFran category, were extracted online from the IFA website. Next, the data available from IFA website was triangulated with data from Military Times Best website. Data from Military Times Best website contained information from top 50 franchisors that offered specific veteran initiatives to their potential franchisees. To illustrate the data collection process, a flowchart of the data extraction process of the franchisor companies from the U.S. IFA website is shown in Figure 1 below.

Fig 1. Flowchart of Data Extraction Process of the Franchisor Companies from U.S. International Franchise Association
From the total of 593 franchisor companies registered for their veterans initiatives, more than one hundred of franchisor companies have been recognized as the best franchisors in 2018 by Military Times Best. For this study, only top 50 best companies were selected and their data from franchise disclosure documents were analyzed. A list of companies featured on Military Times Best website via https://bestforvets.militarytimes.com/franchises/2018/ was browsed through to identify the top 50 franchisors companies. For convenience purpose, these companies have links to their own websites and accessible to all users on fair use basis. These links were used to obtain intended data from each companies. There was no apparent permission required in order to use all corporate information reported on their websites. The limitation of use of site content was for noncommercial use only. This data triangulation was performed in order to determine the validity of the franchisors companies in adapting the veteran initiatives into their franchising systems. The information available on the companies' websites are based on their franchise disclosure documents. Below is a flowchart of data extraction process of the top 50 franchisors companies completed via Military Times Best.
Each franchisor company was given an identifier for easy reference and to maintain anonymity of the data. The identifier started with a label of VetFran01 and ended with VetFran50, representing all 50 franchisors companies as listed in the Military Times Best. A full list of the 50 companies is available to readers upon request made to the author of this paper. Information related to veteran's initiatives from each company's website was further categorized into three major components: financial incentives, company support and training. A thorough content analysis was completed for the 50 franchisors companies based on the three major components identified. The entire analysis was completed within two months (February to March 2019). Specific keywords were singled out for each components as listed in Table 2.   Figure 3 illustrates three components consisting of the financial incentives, corporate support and training extracted from the data triangulation process. It must be noted that all information downloaded and analyzed in this study are true and accurate to the best of the author's knowledge. The downloading process of the franchisor's data was carried out and completed in March 2019. All  assure the accuracy of the data extracted from the franchisors' websites. In the event that contradictory information exist, the possible explanation is that the data on the websites have been updated by the respective webmasters after March 2019.

FINDINGS AND DISCUSSION
From the top 50 franchisors companies listed in Military Times Best, most of them were involved in home building, repair and maintenance services with a total of 18 firms. Restaurants and food retails were the core business for six companies. This food business concept covers fast food and ethnic-themed restaurants. Four companies carried out landscaping services and health or beauty services respectively. Three corporates operated automotive franchising. For business dealing with signage making, retailing, B2B services, and real estate management, there were two companies respectively. A total of seven companies were involved in at least one business concept including travel, moving services, art and photography, computer hardware, cleaning services, vending and consulting. It appears that companies with business concept dealing in home construction and maintenance was the popular choice among the veterans.
All franchisors companies provided financial incentives for the veterans who were discharged honorably to be their franchisees. The financial incentives offered were varied. Fundamentally, the franchisors companies would offer discounts on the initial or franchise fees. In some companies, they provided discounts for startup total inventory cost. The rates of discounts exist either in percentage values or dollar values. Figure 4 summarizes the types of discounts as made available by the franchisors companies in their franchise disclosure document.

Fig 4. Types of Discounts Offered by the Franchisors Companies
In summary, most of the franchisors companies made offers in 10% to 15% discounts range comfortably. In regard to others category, the discounts would be in the amount of $2,500 or $7,500 of the initial or franchise fees. Only one franchisor company was willing to offer 20% discount and $30,000 off the franchise fees respectively. On top of those discounts, several franchisors companies agreed to make some waivers on the royalties for the first year. Only one franchisor firm offered 25% off royalties for the first 5-year franchise term signed. On the other hand, one franchisor company gave off 50% discount on the franchise application fee. Under financial incentives, five franchisors companies facilitated their potential applicants with in-house financing scheme rather than applying loans from commercial financial institutions or funding from government agencies. Only one franchisor corporate was willing to waive franchise fee for disabled veterans and another firm offered extra monetary incentives for those franchisees who set-up multi-units. It can be concluded from these findings that franchisors companies are willing to provide financial incentives for the veterans in effort to ease their financial constraint in signing up with their franchising systems. It also appears that the acceptable rate of discounts is within the range of 10% until 15% off the initial investment. In promoting their franchising systems, some franchisors companies have developed their own financial incentives so their franchising systems looked more attractive to the potential franchisees. In constructing financial incentives, franchisors companies would look at their financial standing and how the incentives would be able to assist the veterans.
In regard to the company support, the main components appeared from the analysis were initial and on-going support provided for the franchisees. Both initial and ongoing support are exclusively depending on the overall franchising system of a particular franchisor company. All franchisors companies have provided initial support in opening outlets for their franchisees. Most of the franchisors companies have offered continuous support in many ways as effort to sustain the franchisees' business survival. Types of corporate support are shown in Table 3. From the analysis, it appears that each franchisor company has designed their own support components in line with their business concepts. Ongoing support; marketing support; proprietary software; intranet platform; grand opening; toll-free line VetFran08 Ongoing support; intensive marketing support; website development VetFran09 Ongoing supports; field operation; proprietary software VetFran10 Ongoing support; initial support; strategic partnership VetFran11 Site selection support; marketing; stylist recruitment; VetFran12 Ongoing support; loyalty program; marketing support; IT support VetFran13 Annual company meeting; awards gala; annual frontline staff meeting; support team on sales, marketing, HR and IT VetFran14 Operational support; marketing support; IT support; networking VetFran15 Marketing support; equipment purchase inventory; networking VetFran16 Public relation support; IT support; marketing support VetFran17 Pre-opening and inventory purchasing support; national convention VetFran18 Ongoing support; 24/7 technical support; operational support VetFran19 Technical and IT support; start-up support; regional meeting; corporate convention; ongoing support VetFran20 Pre-opening support; IT and POS system; post-opening services VetFran21 Ongoing support; national advertising and branding campaigns; annual conference; regional meetings; monthly webinars VetFran22 Initial support; ongoing support VetFran23 Startup marketing program; IT support; conference and regional meeting; licensing support VetFran24 Customer service; marketing and product support VetFran25 Ongoing support; marketing and initial marketing support; inventory support VetFran26 Hands-on support; continuous operation support VetFran27 Ongoing support; proprietary support system; 4-pillar marketing support; national networking support; Ongoing support; marketing support; IT support; regional and national meetings VetFran29 Public relation support; marketing and advertising support; operations and business management support; vendor relationship support; accounting, HR & tax support; national buying programs; proprietary natural VetFran30 Dynamic online business center, national distribution network; purchasing power; multi-channel marketing support; field team of consultants and coaches VetFran31 Ongoing support; mentor program VetFran32 Operational support; marketing programs; 24/7 technical training VetFran33 Personal support from industry experts; initial support; 24/7 access to operating best practices VetFran34 Ongoing support; advertising and marketing support VetFran35 Support in sales, operation, hiring, strategic planning, financial management VetFran36 Ongoing support; strategic partnership network VetFran37 1 year ongoing support; continuous technical support VetFran38 Marketing, web, ongoing support; IT support; customer service VetFran39 Ongoing support; technical support; regional meetings twice a year VetFran40 Support in business development, investment and finance management; marketing system; day-to-day operations support VetFran41 Business management and business intelligence tools VetFran42 24/7 access to business support; marketing tools; corporate forum VetFran43 Day-to-day operational support; marketing support VetFran44 Initial support, computer-based courses, continuing education courses (latest techniques and technologies), commercial contracts for services; certification, billing and collections VetFran45 Back-ends system support; marketing support; community network VetFran46 Setting up and day-to-day operation support; marketing and finance management support VetFran47 Opening promotion support; operation support; location support VetFran48 Business management software support; strategic marketing support; customer loyalty and retention program VetFran49 Startup support; business operation support; marketing support VetFran50 Integrated marketing strategy; national and regional conferences; inventory support Regarding the company training provided by the franchisors to their franchisees, the findings indicated that all franchisors companies required their franchisees to participate in the designated training prior to outlets opening. The participation was made mandatory to both individual franchisees or companies. In case the owners of the franchisees companies were unable to attend the training, most of the franchisors companies allowed a replacement by the franchisees' outlet manager or representatives who would have legal employment status. Taking advantage of the advanced technologies in managing their multi-unit outlets, almost all franchisors companies conducted their training online or through webinars. Table 4 below presents types of training course offered and conducted by the franchisors companies to their franchisees.
The findings from this current study, particularly on the training and support components, is supported by a previous study investigating two franchise brands which revealed the significance of start-up package offered by the franchisors to their potential franchisees. This package may include a series of continuous training and guaranteed support system in ensuring the confidence of the franchisees to get committed in the business for a long term relationship (Leslie, 2010). Buying a franchise business is very expensive but worth investing in compared to other business models (Daszkowski, 2018). Offer of financial incentives could become one of the deciding factors for the veterans to choose a particular franchisor over the others. On-the-job training; classroom training; branch and regional training VetFran08 6-8 weeks initial training; in-store operations training; VetFran09 On-the-job training; classroom training; regional training VetFran10 Site training; classroom training VetFran11 Comprehensive classroom and in-store training; 4-5 days management development training, annual conference VetFran12 Comprehensive training program VetFran13 Classroom-style training classes; online-based training programs; real-time training webinars VetFran14 Industry certification training; comprehensive training program VetFran15 In-field one-on-one training; corporate classroom training VetFran16 On This study has some limitations in terms of data collection process, budget and time constraints. During the data collection process, this study only used the secondary data available online via the websites of International Franchise Association, Military Times Best and also all top 50 best franchisors. Public access to the information available on those websites is limited. Some details are not readily available except to paid members. Therefore, this study was only able to examine three major components such as financial incentives, support and training provided by those top franchisors to the veterans. Some franchisors' websites were not updated in timely manner. Having said that, the information available appeared general and not detailed. A suggestion for future study might be to look at another components in franchising frameworks. This study was also undertaken and completed with no monetary budget from any sponsor. Due to this budgetary constraint, there was a huge obstacle to access and obtain important data from those websites which are only available to paid members. Time is another crucial factor while doing the research. While more time was needed to triangulate the data, this was not possible since deadlines for paper submission must be observed. It is suggested that future study should use multiple database to generate more findings.

CONCLUSION
Overall, it may be concluded that the franchise framework modelled from the U.S franchisors companies could be replicated in Malaysian franchising systems particularly in order to attract the veterans to join the franchising business. Depending on the franchising model, Malaysian franchisors companies could adapt the financing incentives, corporate support and training given to the veterans franchisees. It is also recommended that the government could introduce policy regarding the adaptation of veteran franchising framework into the current franchising system in Malaysia.