Group Effort

Minorities in franchising: what works, what doesn't and what can be done about it

There's an interesting dichotomy at work when it comes to minorities in franchising. In general, if you talk to minority franchisees, they're enthusiastic about the process. When you talk to franchisors and franchise organizations, they express an awareness of how valuable minority franchisees are to the bottom line. And according to the Milken Institute, minorities will become an even more significant percentage of the American landscape with their numbers expected to reach about 50 percent of the population by 2050.

Yet despite all the good vibrations, minority franchise numbers are still extremely low, and the franchise community says most sectors need to conduct outreach efforts to pull in more of this market.

So what's the problem? Lack of information, says Wendy Grant, newly appointed manager of the strategic diversity initiative at Choice Hotels-parent company of hotel brands Comfort, Quality and Sleep Inns; Main Stay Suites; Clarion; Econo Lodge; and Rodeway. "I've asked people who own McDonald's and other franchises whether they've ever thought about buying a hotel franchise. And they say no one has ever approached them," Grant explains.

Net worth requirements may be another perceived barrier, says Russell Smith, director of global franchise development for Athlete's Foot and chair of the minorities in franchising committee for the International Franchise Association (IFA). The price of certain franchises, or at least the perception that prices are high, can be a problem.

GNC franchisee Joyce Smith Patterson points out another factor: "[More and more] minorities are [finally] in jobs that pay very well, and they're afraid to make that step. They think, 'Suppose I do and I'm not successful, and I've left a $100,000 job trying to double my income.' It's just fear."

Patterson, 47, became GNC's first minority franchisee 11 years ago, wiping out her personal savings to come up with the initial investment of about $45,000. Her first location in a Greenwood, Indiana, mall was financed by the franchisor. She purchased her second store in 1994 with a bank loan and bought the third store a little more than one year ago with money from the proceeds of her first two GNC locations.

Minorities haven't always been able to achieve this level of success in franchising, according to Jesse Chalua, 42, owner of two Chick-fil-A franchises in Houston. "[Franchises] are making it easier to get on board," says Chalua, who initially bought an urban Chick-fil-A with a $5,000 investment in 1987 and then traded up to a larger store in a different area after proving himself. "Now, when you sit down and talk with [franchisors], you realize they'll work with you. But that hasn't always been the attitude. That's only happened in the last five or six years."

These days, a number of franchise systems, such as Choice Hotels and FASTSIGNS International, are spending more time recruiting minorities. "Our focus on minorities has begun this year, [primarily because] they represent a lot of potential [as franchisees]," says Larry Lane, FASTSIGNS' vice president of franchise development. FASTSIGNS has 20 minority-owned franchise units in the United States out of a worldwide total of 438 stores. "A number of minorities have resources, but they just haven't seen the franchise opportunities that fit with their background," says Lane.

FASTSIGNS didn't have to go looking for Wendell Haynes, 57, who started a FASTSIGNS franchise in New York City in April 1998. "I was the one reaching out for information, direction and assistance," says Haynes. "I didn't get the feeling that franchise organizations were actively recruiting or not actively recruiting minorities."

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This article was originally published in the November 2000 print edition of Entrepreneur with the headline: Group Effort.

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