Franchising Looks to Minority Owners

Franchised businesses run the gamut of human needs; everything from blinds and bagels to transmissions and tacos are available from a franchise. With this kind of diversity, it only makes good economic sense that the owners of these businesses also include a diverse section of the population.

According to Sonya Brathwaite, educational foundation director of diversity and emerging markets for the International Franchise Association (IFA), one of the reasons there are so few minority franchise owners is a general lack of knowledge about the opportunities available in franchising and a lack of awareness of how franchising works.

With the population of minorities, including African Americans, Hispanic Americans and Asian Americans, expected to increase dramatically in the U.S. in the coming years those franchise companies who want to stay competitive will need to find ways to attract minority owners in order to win consumers in these emerging markets.

To help minorities learn about franchising, in February 2006 the IFA formed an initiative called MinorityFran. Their Web site, www.franchise.org/minorityfran, will help prospective minority franchisees explore a variety of franchise offerings from companies actively looking to recruit minorities. With over 100 franchise companies already participating in MinorityFran, the IFA hopes to increase interest in franchising among minority populations. MinorityFran will reach out to minority communities through participation in a variety events, seminars, and media communications.

Why Franchising?
For anyone interested in business ownership, franchising provides a unique entry. When you purchase a franchise you get the use of the brand and logo, operating system, the method of delivering the product or service, along with training and marketing help. The franchisor makes money from the royalties you pay, usually dependant on your sales. Therefore, the better you do, the more the franchisor makes, giving them an incentive to help you in every possible way.

Because of group buying power, a franchisee saves money on product and supplies. National marketing program participation, which many franchisors require, ensures that consumers have an awareness of the brand. For all of these reasons and more, franchising is a wonderful way to be in business for yourself without being by yourself.

Can I Qualify for a Franchise?
Like any good business, a franchise company will want to populate their system with great people. Since franchising has as its foundation a strong, consistent brand, a franchisor looks for franchisees who will present the brand in the most positive light.

• Financing a Franchise
  One of the first considerations is whether the prospect has the financial wherewithal to purchase and run the franchise. The start-up costs will include the initial franchise fee (which can be anything from under $10,000 to over $50,000); the costs to buy or lease a location and build-out the site, if needed; inventory and supplies; office equipment; and also working capital – the money you will need to keep the doors open and also pay your own living expenses until you start making a profit. This figure varies considerably from franchise to franchise.
  
  The good news is that there are a variety of ways to finance a franchise purchase for those who don’t have their assets in cash. Using a home equity line of credit is a common way to finance a franchise and one can now use money in a retirement account, without penalty, for that purpose. The SBA (Small Business Association) provides a program called The Minority Prequalification Pilot Loan Program which uses intermediaries to assist prospective minority business owner in developing a loan application package and securing loans. The SBA will guarantee up to 80 percent of the loan, making it attractive to the lender. You can find more information at http://www.sba.gov/business_finances/prequal/.
  


• Common Traits of a Successful Franchisee
  The second consideration is whether the prospect has the skills needed for the business. Most franchise companies ask that their franchisees have some type of sales or marketing experience along with general business knowledge. Good interpersonal skills along will be an advantage to a franchisee but few franchisors require the franchisee to have previous experience in the specific industry. Having a strong desire to succeed is the most common attribute desired in a franchise candidate.

Franchising provides a win-win-win situation for all parties: it give the franchisor a way to expand the business beyond a local market and without huge expenditures of money; it gives the franchisee a way to own a business without a lengthy and expensive period of trial and error; and it provides the consumer with less expensive, consistent and reliable products and services.

By attracting more minority entrepreneurs to franchising, the franchise industry is hoping to reach greater penetration in emerging markets while providing more minorities with an opportunity to achieve their dream of business ownership.