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Franchising Insight

Women Franchisees Seem Few and Far Between

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What's stopping women from getting into franchising? Lack of access to capital is the prime reason, preventing otherwise-interested women from bootstrapping a launch.

Why aren't more women getting into franchising? Of the more than 320,000 franchise units in the U.S., about 10% are owned solely by women, while another 20% are owned by male-female partners, according to a 1997 study by Women in Franchising Inc. (WIF), the latest data available.

A lack of access to capital is the primary reason why more women aren't purchasing franchises. One sign is that when women do buy franchises, they often choose less-expensive concepts that can be operated out of the home.

"The disconnect is with the bricks-and-mortars opportunities, such as McDonald's or 7-Eleven," says Erin Fuller, executive director of the National Association of Women Business Owners in Washington, D.C. The financing barrier is one that faces all women in business, she adds.

With women opening businesses at twice the rate of all other businesses, Ms. Fuller says she would expect the same would hold true for franchising. The fact that new franchisees don't have to do everything from scratch--franchisees pay to use a franchise company's brand and turnkey operating system--might help women grow these businesses faster than those they start on their own. But because franchising requires an upfront investment, bootstrapping a launch, as many women entrepreneurs do, isn't an option.

Fewer Women Prospects

Steve Hockett, president of FranChoice Inc., an Eden Prairie, Minn.-based firm that matches prospective franchisees with various systems, estimates that only about 10% of the 700 franchise prospects he'll work with in 2003 will be women.

"Reaching out to women is relatively new," says Lorrie Rennick, former chair of the Women's Franchise Committee of the International Franchise Association (IFA) in Washington, D.C. "The push is really beginning now."

Less-Expensive Outlets

A 1999 U.S. Small Business Administration (SBA) study shows that female franchise ownership decreases as the cost of a franchise increases. At that time, 47% of women-owned franchises cost less than $75,000, while only 42% of women-owned franchises cost $100,000 or more. In contrast, 21% of men-owned franchises owned cost less than $75,000 and 65% of men-owned franchises cost $100,000 or more. Nearly half of all women-owned franchises the SBA studied involved children's products and services and cost an average of about $60,000.

"We know that capital is still a problem because when we looked at the size of the investment required, we saw that the majority of women who owned franchises don't go for the really expensive ones," says Susan Kezios, president of WIF in Chicago.

Sonya Braithwaite, IFA's director of diversity and emerging U.S. markets, notes that women gravitate more toward franchise companies that have been started by women. Of the nation's more than 1,500 franchise companies, only about 23 were founded or are operated by women.

"Most franchise offerings are much more male dominated," says Lawrence Meigs, a director of Visiting Angels, a Baltimore-based home-health-care franchise. "When you are talking fast food, automotive or carpet cleaning, the number of women who are interested is a smaller percentage."

Benefits for Women

After struggling to find good home-based care for her ailing mother, Phyllis Rosen realized the need for a service in southern Florida that would deliver high-quality care for the elderly in their homes. She investigated Visiting Angels and decided to open one in her hometown of Del Ray Beach, Fla., because she admired its approach to providing care.

"I chose to open a franchise so I could get where I wanted to be as fast as possible," says Ms. Rosen, 61, who previously has sold real estate and had started an executive-search firm. "I didn't want to ask others to help me get started, and I wanted to put my money on something that was tried and proven, instead of untried and unproven."

Ms. Rosen says she paid an initial franchise fee of about $14,000 and now pays a monthly royalty of 4.5% of her gross revenues, with a $500 cap. The business has grown significantly in the four years since it opened. "I always made six figures," says Ms. Rosen. "Now I'm making bigger six figures."

Gaining Flexibility

Franchises that can be operated out of the home may allow owners to have more flexible hours. "There's a wide range of options, so you can find ones where you don't have to be there all the time or you can get the flexibility you need," says Ms. Braithwaite.

Some women say they buy franchises so they can be more in control of their lives and gain more balance, says Mr. Hockett. These reasons were behind Kathy Smith's decision to buy a Kids 'R' Kids International child-care franchise in Houston this year with her husband Jim. After prior layoffs from other big companies, Ms. Smith lost her marketing position at Hewlett-Packard Co. in May.

"I became disenchanted with corporate life because I faced layoffs every six months. I finally decided the safest thing might be to open my own business and control my own destiny," says Ms. Smith, 40. "The other reason was I wanted to make sure I had more time for my child and family." Within four months of her layoff, the couple took over an existing Kids 'R' Kids operation that had been open for seven years.

Ms. Smith chose to become a franchisee because, she says, "I wanted the brand recognition and corporate support." While she works long hours and sometimes on weekends, she notes that, as a business owner, she can take time off whenever she wants.

Ms. Smith says securing bank funding for their child-care center was stressful for the couple. "There were so many times when we thought that it wasn't going to work," she says. CIT Small Business Lending, a unit of CIT Group Inc., eventually funded their franchise. "Another bank had turned us down, and we decided to give it one more try," she says. "We made a down payment, and they loaned us the rest."

Inroads into Landscaping

Some women who can overcome the financial hurdles are making inroads into traditionally male franchise businesses. In February, Tami Swearingin and Brenda Gagas, both former managers for PPG Aerospace, left the corporate world to open a U.S. Lawns Inc. commercial-landscaping franchise in Phoenix. Of the company's 122 U.S. territories, theirs is one of only two owned solely by women.

One franchise territory costs about $75,000, says Paul Wolbert, director of franchise development for U.S. Lawns, which is based in Orlando, Fla. The partners bought out an existing franchisee, paying cash and giving the former owner a $50,000 note. They also acquired a second territory that they haven't developed yet.

"We have had a lot of customers say that having women pay attention to their landscaping may bring it up a level," says Ms. Swearingin.

From StartupJournal.com
Copyright © 2004 Dow Jones & Company, Inc. All Rights Reserved

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