The Multicultural Face of Franchising

By Jennifer LeClaire

 

 

Franchising is attracting more women and minorities with entrepreneurial opportunities that offer lower risks, greater rewards and destiny control.

After barely surviving pharmaceutical industry job cuts in the early 1990s, Phil Wilkins took a deep breath and began to rethink his career path. That’s when he stumbled upon a Money magazine article about an African-American entrepreneur who owned several McDonald’s franchises. The story inspired him to leave the turbulent corporate world and build his own safety net.

Wilkins couldn’t be happier he did. Today, he owns four McDonald’s franchises of his own in Lexington, Ky. Once Wilkins proved his business acumen in one restaurant, the company awarded him three additional stores in rapid-fire succession - and he’s not done yet. Wilkins plans to open several new stores in the coming years. The African-American medical salesman-turned-restaurateur credits positive minority role models who paved the franchising road for him - and a McDonald’s brand that embraces people of color - with part of his success.

“I chose a McDonald’s franchise because I saw people that looked like me operating them,” says Wilkins, who is also author of “Own Your Business, Own Your Life,” a book about the transition process from the corporate world to the franchising world. “When I first applied for a McDonald’s franchise, I only had $10,000, but they didn’t close the door. They encouraged me to put a plan in place to come up with the franchise fee. It took me six years of sacrifice, but it was worth it to control my own destiny.”

Like Wilkins, more minorities are finding a fit with franchising. Although there are yet no hard statistics on minorities in franchising, United States Census Bureau data does show that minorities are starting more small businesses and their population is growing rapidly stateside.

According to the Bureau, minority-owned businesses grew more than four times as fast as U.S. firms overall between 1992 and 1997, increasing from about 2.1 million to 2.8 million firms, and women-owned businesses grew at twice the national average pace between 1997 and 2002.

The reasons minorities are flocking to franchising are many. Risk-averse mindsets, a desire to break through a glass ceiling, and the response to mass corporate layoffs over the past two decades are prime attraction factors. At the same time, the franchising industry is reaching out to women and minorities more aggressively than ever before. The combination is birthing a more multicultural face in franchising.

Lower risk, greater reward

The perception of lower business risks that come along with an established franchise brand name has been the traditional draw for entrepreneurs. Franchisees are discovering that brand awareness is easier to attain when franchisors pool marketing resources and present the franchise as a unified front. Franchising’s reputation for success may be an even larger incentive for minorities, however, according to Steve Rosen, CEO of FranNet, a franchise consultancy headquartered in Carlsbad, Calif.

“Minorities seem more risk averse than non-minorities in my experience,” Rosen, says. “That makes franchising a perfect solution for minorities who really want to go into business for themselves. Franchising offers a proven system that helps ensure success.”

Indeed, according to a U.S. Department of Commerce study, less than 5% of franchise businesses were closed each year between 1971 and 1997. Compare that to a U.S. Small Business Administration study conducted from 1978 to 1998, which found that 62% of non-franchised businesses closed within the first six years of their existence, and one of franchising’s benefits become clear.

Busting the glass ceiling

Franchising may also help women and minorities break through an invisible barrier often referred to as the “glass ceiling” that multiple studies show exists. About 70% of women and 57% of men believe a glass ceiling blocks women from climbing to the height of the corporate ladder in many industries, according to a study conducted by consulting firm Accenture.

Franchising may also be the answer for women who have been out of the workforce raising children and would rather re-enter the workforce by starting their own business than try to make up for lost rungs on the proverbial corporate ladder. Women can look to role models like Anne Beilier of Auntie Anne’s, Debbi Fields of Mrs. Fields Cookies and JoAnne Shaw of The Coffee Beanery for inspiration.

FranNet’s Rosen recalls many minority clients who came to him for advice on starting a franchise because, no matter how hard they worked or how much profit they generated for their employer, they couldn’t rise to higher levels in the organization. “Franchising is color blind and gender neutral, “ Rosen says. “Franchising says, ‘Your success depends on your skills and work ethic.’”

Udo Schlentrich, director of the William Rosenberg Center of International Franchising at the University of New Hampshire, says women are attracted to franchising because it allows them to be their own boss on terms that suit their family’s needs. Women are part what he dubs the “second-career population” that is looking for a better way to earn a living.

“Some women are cashing out their 401k to pursue a different lifestyle that lets them be in charge of their own destiny. Franchising is a strong option for them,” Schlentrich says. He cited a woman in his research who worked long hours for a major financial investment company. Instead of continually bumping her head on the glass ceiling, she decided to pursue a fitness studio franchise.

The instability of corporate America has also led more minorities into franchising, according to Schlentrich’s studies. In 1970, he says 98% his Cornell classmates wanted to be senior executives at large companies. Today, he continues, almost 98% of his students want to own their own business.

“People have seen their parents get laid off and want to have more control over their lives,” explains Schlentrich, who is also a member of the International Franchise Association’s (IFA) Educational Board. “Minorities are learning that if you pick the right franchise, you have an opportunity to become a successful entrepreneur much easier than if you start from scratch.”

Attraction by default

As the population of the United States continues to diversify, Schlentrich predicts more minorities will catch the franchising bug. According to the Census Bureau, Hispanics are the nation’s largest minority group and have the fastest growth rate. In fact, Latinos are the leading force behind American population growth in general. The nation’s population grew by 2.8 million in 2005, with 49% of that growth coming from Hispanics.

African-Americans were the second largest minority, totaling 39.7 million, and Asians came in third with 14.4 million. Minorities, then, account for 33% of the U.S. population. However, the Census Bureau showed that Hispanics, African-Americans and Asians are also generally younger than whites, suggesting even faster growth of minorities in the years ahead - with or without immigration. Hispanics are expected to represent 25% of the U.S. population by 2050.

“Franchising is largely driven by demographic trends,” Schlentrich says. “The world is flat, but we are now seeing global business. Lots of immigrants are coming into the country who are quite familiar with franchises and decide to start their own.”

Schlentrich’s studies show that minorities who are entering franchising are engaging family members to help get the business off the ground. Once the franchise sees growth, they open a second franchise.

“Many minorities start off with one store and then it mushrooms because the franchising gives them the tools to run the business and a brand to succeed,” he explains, “and they work hard to make it profitable.”

Franchising’s outreach

To be sure, minorities are turning to franchising because franchising is turning to them. The industry in recent years has developed programs designed to attract minorities to franchising - and it’s working. The IFA is tackling what it sees a lack of awareness about franchising in minority communities. This includes a lack of knowledge about the opportunities in franchising, about how franchising works, and the cost of acquiring a franchise. Burger King, Blimpie, Choice Hotels and MaggieMoo’s are among the many franchisors actively reaching out to minorities.

Stan Friedman, senior vice president and COO for MaggieMoo’s International, an ice cream franchise headquartered in Columbia, Md., is working with the IFA to spread the word that minorities don’t have to be millionaires to get into franchising. The IFA is educating minorities about private equity, tax credits, incentives and debt instruments that can help bridge the gap between an individual’s net worth and their entrepreneurial inclinations.

“People want to do business with people who look like them. Forget about social or political implications. The bottom line is franchisors are missing economic opportunities if they don’t reach out to minorities,” says Friedman, who serves on the board of directors of the IFA’s Diversity Institute Advisory Council. “There are inner-city opportunities and redevelopment programs that can give talented minorities a chance to tap into underserved customer bases.”

Friedman sees the tide turning as the industry embraces minorities and minorities embrace the opportunities. As the awareness increases, the response also increases, he said. His passion is to give minorities permission to believe franchising is a possibility for them, and he’s putting that passion into practice at MaggieMoo’s. More than 20% of the company’s franchisees are minorities.

“We want franchisees who like to make people happy. There is no color to a smile. There is no gender to a smile,” Friedman says. “Franchisors and minority franchisees are attracted to one another because it makes good business sense. Minorities are getting the message that they can satisfy their appetite for wealth and legacy by owning a franchise.”

This article originally appeared in Franchise Market Magazine; Spring 2007

Jennifer LeClaire is a freelance writer based in Hallandale Beach, Fla.

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