Hidden Treasures

This story appears in the November 1998 issue of Entrepreneur. Subscribe »

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Say "inner city," and most people picture crime, decaying neighborhoods, drug dealers and poor people. Say those same words to Fred Westbrook Jr., and the Nashville, Tennessee, entrepreneur thinks pizza and profits.

"One day it just hit me," remembers Westbrook, 50, who lived in the area and worked as a teacher. "I was going to buy a pizza and said, `I wonder why nobody has opened a pizza franchise here.' "

Here was Jefferson Street--a neighborhood rich in tradition and enormous contrasts. On one hand, it's the place any African-American entrepreneur in Nashville thinks about when deciding to start a business. The area is also home to three historically black schools--Fisk University, Meharry Medical College and Tennessee State University.

Jefferson Street is also a place users go to purchase crack cocaine.

"It's no different from any other major city," contends Westbrook. "I think the perception [of Jefferson Street as a bad area is harsher] than the reality. I can't remember when there's been an armed robbery here." Confident he could succeed, Westbrook set out to open a pizza restaurant in his community.

Inner-City Struggles

Although Westbrook is talking about his hometown, his sentiments are ones most inner-city small-business owners nationwide can appreciate. For years, they've stood as lone sentinels in communities abandoned by industry. They've provided jobs and badly needed services despite structural deterioration and neglect by city officials.

Most recently, many have served as role models for organizations such as the Initiative for a Competitive Inner City. Created in 1994 by Harvard Business School professor Michael Porter, the organization's goal is to present a compelling case for why corporate America should be in the inner cities. "There are competitive advantages there," notes the Initiative's Dierdre Coyle. "It's a strategic location with logistical advantages. There is a stable and underutilized work force with strong entrepreneurial potential. There's also an underserved local market with substantial purchasing power."

In fact, a June 1998 study conducted by PricewaterhouseCoopers LLP and the Boston Consulting Group estimated the value of the retail sector in the inner cities at about $100 billion.

That untapped potential is what motivated Westbrook. But opening his business wasn't easy. He unsuccessfully tried to convince five national pizza franchisors that opening a store on Jefferson Street was a good idea before getting a warmer reception from Sir Pizza, a regional chain.

Westbrook then spent months working with a local technical assistance program that helps entrepreneurs create solid business plans and smoothes the way for meetings with bankers. "At every bank we went to, the community development rep said, `I don't see how you could be turned down,' " remembers Westbrook, whose $50,000 loan package was backed by his dad's top-notch credit rating. Despite the positive feedback, the banks all turned him down. Westbrook was forced to take out a $28,000 equity loan on a piece of commercial property he owned and borrow the rest. Since opening in January, the entrepreneur still has not been able to obtain a line of credit.

Westbrook's limited access to capital is typical of inner-city entrepreneurs, says Coyle. Governments are trying to fill the gap by providing money that is lent directly or used to attract private capital. In addition, many states have created enterprise zones featuring incentives for companies starting, expanding or moving into designated urban areas.

Overcoming Obstacles

Money is not the only problem Westbrook and his peers wrestle with almost daily, however. Others include finding reliable help and dealing with crime.

Although he's never been robbed, Westbrook acknowledges the lurking threat of crime. He believes he's had no problems because of his affiliation with the neighborhood, his dedication to providing quality food and his treatment of local drug addicts. "You've got to treat everybody with respect," he says.

Another growing fear Westbrook sees among inner-city entrepreneurs is that their success will attract bigger and better-
financed businesses that will price them out of the marketplace. Although mindful of the potential deep-pockets competition, Westbrook believes that, in the long run, showing appreciation for his customers will give him--and other inner-city entrepreneurs--the edge.

The Last Frontier

Franchisors see potential in the inner cities.

Franchisors have finally discovered the inner city. According to Blair Taylor, founder of Inner City Development Corp., a Marina del Rey, California, franchise holding company, these former business no-man's lands are the last frontier for domestic franchising.

Today, when Taylor discusses the benefits of franchising in the inner city with franchisors at conferences nationwide, he always finds an eager audience. "Every time I speak on this subject, it yields dozens of calls from franchisors asking us to help them," says Taylor, an area developer for The Athlete's Foot in Los Angeles.

Companies like Burger King, Blimpie and Churchs Chicken have already created programs that target minority entrepreneurs. And, according to Taylor, who owns Mail Boxes Etc. and The Athlete's Foot franchises, these two companies are not far behind in developing initiatives as well.

If all these efforts are successful, they'll go a long way toward changing the perception that bankers and others in corporate America have about the business potential of the inner cities.