Franchises a Draw for Minority Entrepreneurs

Franchises appear to be an increasingly strong draw for entrepreneurs from minority racial groups.

A greater percentage of Asians, African-Americans and other minorities are buying into franchised businesses, as opposed to starting their own independent businesses, says a recent study from the International Franchise Association.

And while white franchise owners remain dominant in the industry, their ownership percentage declined from 2002 to 2007 while minority representation edged higher.

"The rise in minorities is a reflection of demographic changes," IFA spokesman Matthew Haller said. "As more minorities establish themselves in the U.S., they are looking to control their destiny through business ownership." Franchising, he adds, "offers some stability that you may not get, going it yourself though a start-up."

Many minority owners have become multi-unit franchise operators, Haller said.

In 2007, minorities owned 20.5 percent of franchised businesses, compared with 14.2 percent of non-franchise businesses, according to the report, prepared by PricewaterhouseCoopers, using data from the U.S. Census Bureau's 2007 Survey of Business Owners.

In 2002, minority entrepreneurs owned 19.3 percent of franchises, the report said.

The survey defines businesses at least 51 percent owned by those from a non-white racial group or of Hispanic ancestry as minority-owned.

Franchises accounted for 3 percent of minority-owned businesses in 2007, slightly more than in 2002 and more than the 1.9 percent of non-minority owned businesses that were franchises in 2007.

White entrepreneurs, meanwhile, owned 73.3 percent of franchised businesses and 80.6 percent of non-franchised businesses in 2007. They owned 79.2 percent of franchised businesses in 2002, so their large representation declined.

Breaking the numbers down a bit:

• Asians owned 10.4 percent of all franchises and 4.9 percent of non-franchise companies in 2007.
• Blacks owned 4.9 percent of franchises and 3.6 percent of non-franchised businesses.
• For Hispanics, the representation was roughly even, with ownership of 5.2 percent of franchised businesses and 5.4 percent of non-franchised businesses.

Read more stories about: Franchise, Minority-owned businesses