“Strength lies in differences, not in similarities.” — Stephen R. Covey
In the ever-evolving landscape of entrepreneurship, the rise of minority-owned franchises is significantly impacting the business world. Over the past two decades, the increase of minorities in franchising has continued. According to the U.S. Census Bureau, more than
30% of franchises are owned by minorities, while only 18.8% of non-franchised businesses are. Even with the positively trending numbers, increasing diversity will benefit the franchise world.
Historically, minorities have faced barriers to entry and systemic challenges in establishing and growing businesses. Franchising has been widespread with minorities because it offers the opportunity to bypass some of the challenges of starting a business independently. Additionally, franchising can help minorities avoid some of corporate America’s bias and pay inequality.
Minority-focused access to capital
While franchising is a vital path for minorities, there are still barriers to entry, especially regarding access to capital and training. The franchise industry has created several programs designed to promote minority franchise ownership. One example is the Pathways Initiative. This program was launched to help expand the number of restaurants owned by African Americans.
According to the National Restaurant Association (NRA), only 8% of restaurants are owned by African Americans, despite restaurants being the top franchise category. Working with the NRA, the Multicultural Foodservice & Hospitality Alliance launched the Pathways Initiative to encourage leaders, brands, and financial institutions to focus on setting African Americans up for franchising success.
Other programs that can help increase diversity in franchise ownership include the
Diversity Institute from the International Franchise Association (IFA). This program promotes and fosters diversity and inclusion, while the DiversityFran program connects minority franchisees and IFA member franchisors to promote diversity, especially in emerging markets.
Women are also making inroads into franchise ownership, comprising more than
30% of franchise owners.
Franchise Insights finds that the number of women seeking information on franchise ownership is higher than that of men. The popularity with women may have to do with the fact that the franchising industry has a much smaller gender pay gap, at 90 cents to the dollar than corporate America’s
82 cents to the dollar.
The IFA also has the Women’s Franchise Committee to encourage women in franchising by creating a network of business professionals dedicated to strengthening their successes and a Franchising Pride Council to support franchise ownership in the LGTBQ+ community.
The Landscape of Minority-Owned Franchises
Minority-owned franchises represent diverse industries, from food and beverage to retail and service-oriented businesses. The rise of minority-owned franchises is a testament to the entrepreneurial spirit within these communities and a response to an increasing demand for diverse representation in the business world. What’s more, improved diversity is a sound business decision. Research indicates that encouraging ethnic diversity boosts profits by as much as 35%. It also aids in recruiting and hiring, with more than 75% of prospective employees indicating that working for a company that embraces diversity is essential to them.
One of the significant challenges faced by minority entrepreneurs historically has been breaking through stereotypes and overcoming biased perceptions. Franchising allows individuals to challenge these stereotypes, showcasing their business acumen and leadership skills. By operating franchises successfully, minorities are building profitable enterprises and dismantling preconceived notions about their capabilities.
The establishment of minority-owned franchises contributes to economic empowerment within minority communities. As these businesses thrive, they create job opportunities, stimulate economic growth, and serve as sources of inspiration for aspiring entrepreneurs. The economic impact is not confined to the immediate franchise owner but radiates through the local community, fostering financial stability and sustainability.
Implications for Diversity and Inclusion
The growth of minority-owned franchises has broader implications for diversity and inclusion in the business world. The presence of minority-owned franchises contributes to increased representation in the business landscape. This inspires future generations of entrepreneurs and fosters a more inclusive and diverse marketplace. Consumers are increasingly drawn to businesses that reflect their values, and diversity in ownership can lead to stronger connections with diverse consumer bases.
The success of minority-owned franchises goes beyond individual businesses, creating a favorable economic ripple effect. As these franchises thrive, they generate employment opportunities, contribute to local economies, and inspire other minority entrepreneurs to explore business ownership. This cyclical effect helps break down systemic barriers and create a more inclusive economic environment.
Improving future minority franchise ownership starts with an audit of how diverse your franchise system currently is—how many minority owners there currently are, how you are marketing to diverse groups, and what programs, if any, you have geared to helping minorities with capital and fees. Additionally, take a look at the vendors you are using. Increasing diversity there is another way to benefit a more significant number of minorities.
Challenges and Opportunities
While the rise of minority-owned franchises is a positive development, challenges still exist. Minority entrepreneurs may face limited access to capital, cultural biases, and systemic barriers. However, these challenges present opportunities for stakeholders to actively support and promote diversity in entrepreneurship.
The rise of minority-owned franchises is a powerful testament to the resilience, determination, and entrepreneurial spirit within diverse communities. As these entrepreneurs break through barriers, shatter stereotypes, and build successful enterprises, they contribute to a more inclusive and dynamic business landscape. The transformative potential of franchising is in providing opportunities for all, regardless of background. Moving forward, continued efforts to address challenges, promote inclusivity, and support minority entrepreneurs will ensure that the momentum of diversity in franchising continues to flourish, creating a more equitable future for business ownership.
Seth Lederman of Frannexus has years of experience helping minorities and others find the best franchise to meet their goals and dreams. For more information and how to start pursuing your entrepreneurship dreams, contact Frannexus today.
About the Author
Seth Lederman, CFE, a Franchise Acquisition and Development Specialist, is a multi-faceted entrepreneur with over 30 years of experience in small business success, including ownership and sale of his business enterprises. He frequently contributes to The Franchise Journal and is on the exclusive Forbes Business Council. Contact him at seth@thefranchiseconsultingcompany.com.
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