Minorities in Franchising

The economic power of minorities in franchising has been rising steadily during the past several decades. The reasons are not complicated: the number of Blacks, Hispanics, Asians, and Native Americans has grown steadily as a percentage of the United States population, making these groups a "new majority," a trend that will continue in the coming decades.

What this means for business in general, and franchising in particular, is that more customers, more employees, and more business owners will come from these groups. The "old majority" has been playing catch-up to the changing national demographics, hiring specialists with titles such as chief diversity officer or diversity/inclusion manager to help them understand and keep up with the shifting population.

According to the U.S. Census Bureau, the number of minority-owned businesses rose from 7 percent of all U.S. businesses in 1982 to 18 percent in 2002. More recent numbers from the Census Bureau show that the number of minority-owned businesses increased by nearly 50 percent (45.6 percent) between 2002 and 2007, while the number of U.S. businesses increased during that period by 18 percent to 27.1 million; and of that 27.1 million, minority-owned businesses accounted for 5.8 million. As the Census Bureau parses the numbers gathered in the 2010 Census, those numbers are sure to rise even more.

These new data are drawn from the Preliminary Estimates of Business Ownership by Gender, Ethnicity, Race and Veteran Status: 2007, released in July 2010. Additional reports will become available through June 2011, parsing the data further by minority group, gender, veterans, and more.

What this means to franchising is that minorities have arrived, are here to stay, and are on the road to increasing dominance as franchisees, consumers, and employees.

Many franchisors have initiated programs to recruit minorities, and it's not out of being "PC" or for altruistic reasons - unless you consider providing business ownership opportunities, job creation, and bringing new businesses to underserved communities altruism: it's good business and they know it. Discounts on franchise fees and royalties, and payment plans to make entrée easier for minorities, are not unusual at many franchise companies. And it's no secret that customers like to shop where people are more like them, and the same holds true for employees.

Within franchising, the International Franchise Association (IFA) has pioneered several initiatives and programs of its own to ease the path for minorities to become involved in franchising. In 2006, the IFA launched its MinorityFran program, with the goal "to not only increase the numbers of minority franchisees, but to send a message to all communities that franchising is a smart and affordable way to realize the American Dream of small-business ownership."

An IFA study to identify the obstacles faced both by franchisors seeking to recruit minorities and by minorities seeking to become franchisees identified three "gaps": an informational gap, a relational gap, and a capital gap. To help close these gaps, the IFA's Diversity Institute launched a program to hold one-day meetings in cities across the U.S., working with national and local groups such as the National Urban League, the Association of Small Business Development Centers, the Minority Business Development Agency, the U.S. Hispanic Chamber of Commerce, the National Black MBA Association, the Minority Business Development Agency, and local chambers and other business development groups.

In fact, many groups, businesses, and organizations, both governmental and private, exist to help foster the participation of minorities in business, and franchising in particular:

  • National Minority Franchising Initiative (NMFI)
    Based in Oakland, Calif., the NMFI was created in 2000 "to level the playing field and meet the needs of a largely under-represented market." Its program "represents an effective and cost-efficient tool for franchisors to increase minority representation within their systems." In 2006, the organization was underwritten by 20 well-known franchise companies. Each year, NFMI publishes its list of the Top 50 franchises for minorities, based on factors including brand identification, percentage of franchises that are minority-owned, franchisee satisfaction, and the number of minorities in the brand's top management.
  • U.S. Small Business Administration (SBA)
    The SBA has a cornucopia of resources, programs, and services available to minority-owned businesses, which its defines as follows: "Minority-owned firms are those where the sole proprietor is African American, Hispanic, Asian, Pacific Islander, or American Indian/Alaska Native, or, in the case of firms with multiple owners, where 51 percent of the stock interest, claims or rights is held by African Americans, Hispanics, Asians, Pacific Islanders, or American Indians/Alaska Natives."

Also see:

States and many larger cities also have their own programs focused on helping minority-owned businesses. Find them on the SBA site (use the SBA link above).

Some other minority-focused informational resources include:

  • DiversityInc
    A wide-ranging resource for all things minority business; publishes an annual Top 50 firms for minorities.
  • Hispanic Enterprise
    Publishes a list of the top 25 franchises for Hispanics, among its many resources for small-business owners.
  • Black Enterprise
    Features a section devoted to franchising, among its many other small-business resources.
  • MWBE.com
    Provides services to educate, mentor, and help leverage owners of minority-owned and women-owned businesses. Of particular interest is a focus on how to become certified as a minority-owned business.
  • MWIB (Minorities And Women In Business)
    Established in the early 1980s, MWIB serves as a media forum for the discussion of issues that affect minority-owned, women-owned, and veteran-owned businesses.

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