Franchising looks to minority owners for growth in key population areas

by Diane Pleuss

{Diane Pleuss is a franchise consultant with FranChoice Inc. and a good friend of FocalPoint Business Coaching of Arizona. FocalPoint is always looking for new franchisees that would be great coaches and has always been a supporter of all minority groups. If you’re interested in seeing if Business coaching is right for call Coach and FocalPoint Area Developer (for Arizona/New Mexico/Nevada) Dan Creed at 602-697-5949 or write at dcreed@focalpointcoaching.com}

Mary Forte is an African American woman who wanted to make a difference in her community. She opened a franchised coffee house, It’s A Grind, in a part of downtown Oakland that is being revitalized and worked with the Oakland Business Development Center to secure two loans. She also receives tax credits because the business is located in the Oakland Enterprise Zone and because 75 percent of her employees live in that zone. After 30 years of working in corporate America, Forte is now living her dream of having her own business and, at the same time, giving back to her community.

Nellie Salinas, an Hispanic woman who earned a degree in business but could not find a job, took an administrative position at Molly Maids, a franchised residential cleaning business. She moved up the ranks, and six years later is the co-owner of a $1.7 million business and ready to either buy out the founding partner or open up her own Molly Maids franchise. Franchised businesses run the gamut of human needs – everything from blinds and bagels to transmissions and tacos. With this kind of diversity, you would expect franchise owners to mirror the ethnic diversity of the population. In reality, Forte and Salinas are rare in the franchising world, where minorities are vastly underrepresented. According to Sonya Brathwaite, educational foundation director of diversity and emerging markets for the International Franchise Association (IFA), minority groups lack knowledge about franchise opportunities and do not have an understanding of how franchising works. But franchisors are waking up to their needs. With the population of blacks, Hispanic Americans and Asian Americans expected to increase dramatically in the United States in the coming years, franchise companies are becoming acutely interested in attracting minority owners in order to win consumers in these emerging markets. Franchising organizations are helping, too. In February 2006 the IFA implemented an initiative called MinorityFran. Its Web site, www.franchise.org/minorityfran, showcases franchise offerings from companies actively looking to recruit minorities. With more than 100 companies already participating, the IFA hopes to increase interest in franchising among minority Populations.

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 and the method of delivering the product or service, along with training and marketing help. The franchisor makes money from royalties, usually based on sales. The better you do, the more the franchisor makes, giving them an incentive to help you. Because of group buying power, a franchisee often saves money on products and supplies. National marketing program participation, which many franchisors require, ensures that consumers gain awareness of the brand. For all of these reasons, franchising is a wonderful way to be in business for yourself.

Qualifying for a franchise
Like any business, franchise companies 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. They consider both finances and aptitude. Franchise prospects must have the financial wherewithal to purchase and run the business. Startup costs include the initial franchise fee (which can run from less than $10,000 to more than $50,000); the costs to buy or lease a location and build out the site, if needed; inventory and supplies; office equipment; and working capital – the money necessary to keep the doors open and pay living expenses until you start making a profit.
Financing a franchise
The good news is there are a variety of ways to finance a franchise purchase. Using a home equity line of credit is one way. Retirement account funds can also be used. In addition, the SBA (Small Business Association) offers The Minority Prequalification Pilot Loan Program, which uses intermediaries to assist prospective minority business owners 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/.

Traits of a successful franchisee
Franchise prospects also must possess skills needed to be successful in 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 also will be an advantage, 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 gives the franchisor a way to expand a business beyond a local market without huge capital investment. 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 and more consistent and reliable products and services. By attracting more minority entrepreneurs, the franchise industry is hoping to reach more customers in emerging markets while, at the same time, providing more minorities with an opportunity to achieve their dream of business ownership.

(Reprinted with permission from Diane Pleuss and the East Bay Business Times)