Against a backdrop of increased exposure of pro athletes going broke, more and more NBA veterans are taking note of the business success that former players Magic Johnson, Jamal Mashburn and Junior Bridgeman have had—all in the same field—as they prepare for their own lives after basketball.
The three ex-ballers have proven that an underrated off-the-court industry has the makings of a safer and more lucrative long-term investment than other businesses. The industry of choice? Franchising, mostly in the food and quick-service restaurant (QSR) arena.
From 2009 to this year, Trevor Ariza (Buffalo Wild Wings), Chauncey Billups (Wendy's), Caron Butler (Burger King), Drew Gooden (Wingstop), Kris Humphries (Five Guys), Steve Nash (Liquid Nutrition) and Quentin Richardson (East Coast Wings & Grill) have all become franchisees, and they're continuing to build up their establishments, including adding new locations.
Also, last year, when Jared Jeffries was playing for the Portland Trail Blazers, he entered an agreement with ZIPS Dry Cleaners. Looking ahead, there are at least two more current players exploring franchise opportunities, according to an NBA rep.
"I definitely hear an increased buzz about (franchising). I definitely see more proposals for those types of structures," said financial adviser to NBA players Carrie Potter, who has worked on marketing partnerships with Papa John's and Taco Bell. "What's even more interesting is I've actually seen three or four proposals in the last five years that are actually to be the franchisor—to become the franchisor, to be the one that buys it and trademarks the products and all of that to individual stores, which is another very interesting model."
While no active player is a franchisor just yet, that ambitious vision and the additional franchising businesses in NBA circles were sparked from the recent success of Mashburn, Bridgeman and the most visible, Johnson—the latter two being among the wealthiest African-Americans in the country, according to Forbes. Other notable ex-players turned franchisees include Albert King (Wendy's), Walter McCarty (Papa John's and Dunkin' Donuts, along with Mashburn), Shaquille O'Neal (Auntie Anne's) and George Tinsley (TGI Fridays).
"I think the higher-profile players always bring more attention to things," said Rory Sparrow, a former NBA player who's now a league VP of Player Development. "Magic brought more attention to (franchising). Of course, once you see one of your own capable of performing on that level, it gives you a certain confidence that you too can do it."
After Bridgeman spent his 12-year career primarily with the Milwaukee Bucks, he became a franchisee of five Wendy's in the city in 1988—one year after he retired—which, at the time, averaged about $600,000 in revenue. Bridgeman said he was inspired by the team's general manager, Wayne Embry, who was involved with McDonald's.
Today, Bridgeman's company, which employs more than 15,000 people nationwide, has 195 Wendy's—each raking in more than double that initial return—and 124 Chili's restaurants in 15 mostly Midwest states, all worth a whopping $750 million.
Mashburn, a former All-Star who played in the NBA from 1993 to 2004, first got into franchising in 1997 when he met Chris Sullivan, one of the founders of Outback Steakhouse. Ever since Mashburn was a teenager, intrigued by people holding briefcases on their way to work, he was always thinking about a business career beyond basketball.
Today, Mashburn has 38 Outback Steakhouses, 40 Papa John's and three Dunkin' Donuts, covering California, Chicago, Kentucky and Tennessee, and he's still making more than $12 million per year—way above his average NBA salary over the course of his career back then. His portfolio also stretches into these categories: automotive, hospitality, horse racing and a newly added partnership with a venture capital firm.
As for Johnson, he's been the biggest-named franchisor and investor of the three, dipping his fingers in many different businesses across multiple industries. His restaurant endeavors have included Burger King, TGI Fridays and, most notably, Starbucks. Since 1998, he developed 105 of them in under-served communities in Los Angeles, New York and Washington D.C., and then sold his shares back to the company in 2010.
So what are the biggest reasons that attracted Bridgeman and Mashburn to franchising, which still applies to today's players? Their first QSRs—Wendy's and Outback Steakhouse, respectively—were already established businesses.
"I thought that with the franchises, the system was already in place and there's maybe a little less risk because the system is developed," Bridgeman said.
Mashburn added: "It's an easier way to scale a business. You can pull together an operational team. It's tough to do a start-up business or anything like that. I've seen a bunch of restaurants fail because they don't have the operation efficiencies able to go negotiate with their vendors. There's value in franchising; that's how I looked at it."
In addition to the proven track record of QSRs, players benefit from going through required programs administered by the eateries that teach them about the ins and outs of the business. The QSRs sometimes also demand an industry professional to work as the player's operating partner, if one is not in place. Those factors help players gain a better understanding of what's needed to make the franchise profitable.
Conversely, many younger players shy away from franchising because of the lengthy time commitment. During the summer, Sparrow said those players are mostly focused on developing their game so they can stick around the NBA for many years, while veterans are more open to exploring off-the-court opportunities because they know the window is closing on their playing career.
"Franchising with good organizations requires you to actually go through a significant time commitment in terms of training, actually having a hands-on experience," Sparrow said. "I know McDonald's, Burger King and Wendy's require you to work at every station so that you have a full working knowledge of the business that you are operating. So that limits a lot of players' involvement in their early parts of their career because they're still trying to be the best basketball player that they can be, and they haven't really mastered all of the time management skills necessary to commit to another career."
There are other reasons why many younger players don't get involved with franchising, or they're advised not to by their agents and financial advisers. For starters, Ramasar said many of them don't have the patience or care enough about waiting on a QSR return on investment, which usually takes a year or more. Also, the operating income to acquire a single franchise might be $250,000 or more, according to Potter, usually too high for a younger player based on his yearly salary.
Potter and Ramasar said it's important for younger players to first build wealth, which mostly happens through landing higher contracts, endorsements, appearances and stock and real estate investments—sexier, shorter-term financial advances.
"Advice to young guys in the NBA: Don't do franchising," Ramasar said. "Step one is to establish a financial plan that ensures 40 years of income based on an appropriate level of spending in retirement. Divide money between core and excess."
Ramasar said once a player collects enough excess money, typically later in his career, then five percent could go towards entrepreneurial endeavors, such as franchising. Potter agreed on setting aside a small pie for those interests.
"You carve out a piece in their overall model for how much money should be allocated to that interest," she said. "Let's say you have $10,000 total in your portfolio and you take $8,000 to go put into franchises. There's not a financial planner in the world that would say that's a good idea because that's really high risk. The important thing is when you're looking at other ways, it's important for a lot of athletes that they have some piece that they can kind of take ownership over, and really work to develop in a smart way. So that's kind of that piece where you would see franchises."
However, once a player has the necessary funds to invest in a franchise, it's not automatically set up for success.
"One of the misconceptions about a franchise is that it's a proven business model, so 'I'm guaranteed to make money out of it,'" Potter said.
Ramasar added: "Athletes franchise because they've seen peers do it, but 85 percent of the franchises will go bankrupt. It's a very illiquid business that requires cash calls at often unpredictable moments."
But in recent years, players and their business teams have taken more preventive steps to avoid financial pitfalls. Potter and Ramasar said a business plan and seasoned management team with restaurant experience—not the player's family or members of his entourage—are vital ground rules for launching a franchise the right way.
Many players are routinely pitched start-up hospitality and entertainment ventures from friends and family—some of which sound more attractive than franchising—but many are simply ideas without structure. Mashburn said players need the wherewithal to say no and do their due diligence, which many times just means helping out and not getting financially tied down in a contract.
"I've been approached about the record company and different things like that," Mashburn said. "The most I can do for you is when you put out a CD of your artist, I will buy 100 copies of it. That's going to be my investment because I don't understand the business of the record industry."
Bridgeman added: "Don't rely upon your second cousin on your uncle's side by way of marriage to run it for you. If you are not able to really get involved in the operations and the day in and day out, and you can't because you've got a career, it's just another strategy for failure."
Ariza, for example, demonstrates that commitment. The Washington Wizards forward, who wanted to establish Buffalo Wild Wings as the first casual-dining franchise restaurant in South Los Angeles in 25 years, saw the franchising opportunity as "sustainable," and one that could carry him financially in post-retirement. Since its groundbreaking in 2011, Ariza, 28, regularly participates in the operations.
"Definitely," he said. "I am very, very involved on a week-to-week basis. I deal with inventory, what's going out and coming in, how many people are coming in versus takeout, what's going on throughout the week so we can get people in there, different ways to promote the restaurant. As far as our location, we won an award for most improvement over the years. We've been open coming up three years and we've topped ourselves every year, so we've been doing great."
Ariza's involvement in Buffalo Wild Wings, as with most of the other current players with their franchises, represents a venue he enjoys—in his regard, for its chicken and sports viewing. Bridgeman said that kind of passion is a "main principle" when starting a franchise; if the player doesn't have it, he won't be fully invested in the business. For Nash, he shared a similar common ground with Ariza, calling his association with Liquid Nutrition a "natural fit."
"It's no secret I've tried to eat healthy and lead a healthy lifestyle," Nash said. "Obviously that's not enough to jump into business, but the people behind it, their philosophy and the business model all made sense as well. It was a great opportunity all around."
Speaking of healthiness, while most of the players' restaurants offer many high-calorie foods, Bridgeman said as the general population becomes more aware of their eating habits, there is a conscious effort among franchises to scale back on those unhealthy offerings and add alternatives, like a fruit salad as a side dish instead of french fries. That progression sheds a positive light on the players' involvement. Being in the fitness world as high-profile individuals with tons of young fans, it's important that they're mindful of their food and beverage business efforts.
Potter also said she's hearing more players promoting healthy living through different initiatives with their franchises.
"What a lot of guys are doing, even who have corporate support from those types of entities, is incorporating some sort of healthy campaign within that—something where Buffalo Wild Wings supports a day for kids at the park," she said. "You can tie in a healthy side to it, so it becomes part of your marketing strategy."
Not every franchise experience is positive—and it could relate to the franchisor. About eight years ago, newly retired NBA player Corey Maggette became a franchisee in a Dup'ars restaurant in Los Angeles. According to his longtime business partner, T.J. Doyle, it was a "bad experience because of the franchisor's management team, how the deal was structured and the communication between the directors and investors.
"Ones that work well are because the management team gets players involved in consistent meetings, calls and business operations to help with growth or ideas," Doyle said. "Dup'ars took money and never communicated with players who invested about what was going on with the business."
For players interested in franchising, there are many resources available. One is the Professional Athlete Franchise Initiative, which is run by former NFL player-turned-entrepreneur Michael Stone, who has consulted with NBA, NFL and other professional athletes through the years. The initiative has even put together programs with the NBA.
The most direct and extensive assistance for players comes from the NBPA's Career Development Program, which is led by Deborah Murman. Not only are more players turning to the union and former players for guidance, especially Bridgeman and Mashburn, but they're also seeking more financial and legal advice. With stories of bad investments becoming a hotter topic of conversation around the league, Murman said an increasing number of players are interested in franchising as a potentially safer investment with lucrative long-term gains.
"They know that they can apply a number of the skills they developed playing basketball to franchising," she said. "These skills include an ability to follow a game plan; having a competitive drive; being coachable, team-oriented and self-motivated; and demonstrating leadership."
While Murman doesn't tell players to choose or avoid certain businesses, she encourages them to be aware of the pitfalls in any career option.
"Before getting involved in any business, we encourage players to do their research," she said. "We do this for several reasons—first, to decide if the career is the right fit; and second, to recognize what they need to do to be successful in that industry. For franchising, we recommend that they look at several different types of franchises and compare them. Different franchises have varying time and monetary commitments, along with different opportunities for growth."
Ariza offered similar advice for younger players and anyone interested about doing their homework and networking with the right people before embarking into a business.
"It doesn't just have to be franchising; it can be anything," he said. "Anything you have interest in or it comes to your liking, research it, understand and find out about it, and if it's something you like, get all the information you possibly can. Then take it to your financial people and see how it works for you."
Murman's group also organizes executive programs for players to learn about the business techniques of franchising. One crucial tip is location. As Bridgeman said, "Sales are driven on density of population," and Ramasar added, "It's important to own an entire zip code of a franchise to control the client experience in that city."
These days, the Southeast is a prime target for players because there is a lot of development going on there with new malls and neighborhoods. Potter said players also envision owning multiple franchises in the same large-scale area.
"It's to make as much money as possible," she said. "Then you can have management that crosses over, you can do training of employees. The more you get, the more you can scale the different internal functions of that."
In the past few years, more attention has been paid to the alarming rate of NBA and pro athletes going bankrupt. In 2009, Sports Illustrated published a story saying 60 percent of former NBA players are broke within five years of retirement. And last year, ESPN released a "30 for 30" film called Broke, an allegory for the financial woes haunting athletes all over the world.
"The bar is pretty low for athletes who have been successful in business," Mashburn said.
But perhaps with the evolution of franchising, it will send this louder message to players: to examine life after basketball with a more critical and long-term eye. Ariza believes it's already happening among his peers.
"I think we're becoming more in tune with the business as far as after basketball and following after the trends and the successful people," he said. "If you look at athletes after they're done with basketball, they kind of run into rough times. We just look at those things as examples to how to do better, and I think we've done a pretty good job."