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Franchising Insight

Franchising Attracts More Women, Minorities
August 26, 2004
URL: http://www.entrepreneur.com/article/61324

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Though there are few minority franchisees, women have made greater inroads in the business. Learn about special programs to help attract and finance prospective minority owners.

"Building Bridges to Success" was the slogan for the International Franchise Association's annual convention held in February. In recent years, the Washington, D.C.-based trade group has started building other bridges--towards women and minority communities. That job is making headway, but construction is far from finished.

In 1999, the IFA's Women's Franchise Committee hosted its first networking reception at its annual convention, held that year in Las Vegas. The event was in a small room far from the convention floor, and the only refreshments, chocolate-covered strawberries, dribbled down on the dresses of the few of us women who found our way there.

At this year's convention, you could hardly find a place to stand at the committee's networking reception, let alone eat barbeque from one of several serving stations. The room, decorated with saddles, faux fences and lots of bandanas, was adjacent to the exhibit hall of the San Antonio Convention Center, and the event was a cheerful mob scene.

"Interest in the Women's Franchise Committee has grown phenomenally in the last four years," says Nancy Smith, 41, a partner with the law firm Dorsey & Whitney LLP in Denver and chairman of the committee.

Interest in minorities also has increased, acknowledges C. Everett Wallace, 51, co-chairman of the National Minority Franchising Initiative, and the host of a well-attended reception for minorities in franchising the next night. "But one-plus-one may be twice as much, but it's still not near 100%," he says. "Franchises are selling to more consumers who are black, brown and yellow every day. We need more franchisees who match those consumers, and I'll continue beating that drum as loudly and as long as I have to."

His tune is still faint. African-Americans, Hispanics, Asian-Americans and Native Americans make up 30% of the U.S. population, but only 6% to 9% of current franchise owners, according to the 2002 Minority Franchise Guide (available through www.minorityfranchising.com).

Far Outnumbered

The numbers are startling. The guide lists 590 franchise systems (out of a universe of about 2,500) that are committed to expanding minority participation and the numbers of minority franchisees they have now. When filling out a survey on the subject, many franchise systems didn't complete the section on the number of their minority franchisees , the guide explains, because they don't keep track of franchisees by race, or because they don't have any minorities to count. Back Yard Burgers, based in Memphis, Tenn., for example, lists one Asian-American among its 68 franchisees, and none from other ethnic groups. But even at systems that have been active in minority-outreach efforts, such as Sterling Optical of East Meadow, N.Y., minority representation is low. Sterling has 10 minorities out of 270 franchisees. Heel Quik! in Marietta, Ga., has 57 minority franchisees out of 680 franchisees.

The exception is hotels. According to the Asian American Hotel Owners Association in Atlanta, 35% of the nation's 17,000 hotel properties are owned by Asian-Americans, and in some systems, like Hospitality International, in Tucker, Ga., 75% of the 252 franchisees are Asian-Americans. Debbie Smith, a former chief diversity officer at the IFA, credits the Indian-American community's financial support of each other for that success.

"The vast majority of franchises were developed and nurtured by white males," says Mr. Wallace, "and it's easiest to sell them to guys just like you." The other problem, of course, is financial. Most minorities simply do not have the collateral or family wealth to buy franchises. And those that do have half a million in net worth "aren't about to give up good jobs to flip hamburgers," he says.

Women Making Inroads

The numbers are better for women. According to the IFA, about 30% of the nation's 300,000-plus franchises are owned by women. Public-relations maven Rhonda Sanderson, 52, of Chicago, has been representing franchise clients for 21 years and says the number of women franchisees has increased by at least 50% in recent years. Some systems, like Curves, of Waco, Texas, with 5,000-plus units, are almost exclusively female. According to the IFA, 23 franchise systems, including It's Just Lunch, of San Diego, and Sandler Systems, of Stevenson, Md., were founded by women.

Females and minorities are certainly more prominent at IFA events. Of the 127 main speakers at the annual convention, 22 (17%) were female and six (4.7%) were minorities, although that includes an Asian-American woman counted twice. In 1999, Pepsico executive Ronald Harrison (who joined when Pepsi owned Pizza Hut, KFC and Taco Bell) was the IFA's first chairman of color, and the 2000 chair, JoAnne Shaw, president of the Coffee Beanery in Flushing, Mich., was the first female.

That's something Ms. Sanderson never dreamed could happen in the early 1980s when she first started attending IFA events. "It was a good-old-boys network," she recalls, "and the few women who owned franchises then needed their husbands as partners or co-signers."

This attitude persisted far too long, says Lorrie Rennick, 56, vice president of American Leak Detection in Palm Springs, Calif. "One of our franchisees was a couple, but faxes from our office were addressed just to him," she says. "The wife challenged me to make things right." Mrs. Rennick changed things at American Leak, then took over the Women's Franchise Committee for two years, starting a mentoring program and, at the convention, expanding the all-day Women's Leadership Forum into a popular event and turning that poorly attended networking reception into a real party.

"Now new women have a place to go to meet people," says Ms. Sanderson. "I would have loved something like that."

Outreach Efforts

In fact, women and minorities interested in franchising now have lots of ways to learn about business throughout the year:

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