Awareness Boost Key to Expanding Minority Franchise Ownership

When it comes to increasing minority ownership in franchising, education is perhaps the most effective tool.

It’s certainly the main one for Tarji Carter, founder and president of The Franchise Player, which provides education and resources to the African American community. From her own experience and from time working around franchise brands, Carter learned that minority communities lacked important details about the franchise model itself.

“There’s a need for more information that unfortunately doesn’t reach the community, and it goes as far back as when I was a kid,” Carter said. “My dad was a smart guy and he wasn’t aware of franchising, and I remember going to the local McDonald’s in my neighborhood and never knowing this could be a lucrative opportunity to create generational wealth. Once I did learn about it, I just thought, ‘there are so many others who don’t know about this.’”

Carter launched The Franchise Player in January, after working with the Multicultural Foodservice & Hospitality Alliance and its Pathways to Black Franchise Ownership program. Created in December 2020, the Pathways program connects franchise brands with Black leaders in the restaurant industry who haven’t had the opportunity or resources to own a franchise before. It counts Noodles & Co., Denny’s, Smoothie King and WOWorks among its franchisor partners.

Related: Why Noodles & Co. Joined Black Franchise Ownership Program

Before her time at the MFHA, Carter worked in franchise sales and development for 15 years with brands such as Bojangles, Wingstop and Dunkin’. It was in that capacity that she noticed the lack of diversity.

Exact figures on minority-owned franchise businesses vary. An International Franchise Association study conducted with PricewaterhouseCoopers in 2018 found 30.8 percent of franchises were owned by minorities, with Asian Americans owning 11.8 percent, Hispanic Americans owning 10.4 percent and Black Americans owning 8 percent.

American Indians, meanwhile, owned 0.8 percent, and Pacific-Islanders owned 0.2 percent. That study used numbers from the U.S. Census Bureau’s 2012 survey of business owners, which selected 1.75 million businesses to include.

Another IFA report, done in partnership with Oxford Economics in 2021, had different findings. It showed 26 percent of franchise businesses were owned by people of color, with Asian Americans owning 18 percent, Hispanic Americans owning 5 percent, African Americans owning 3 percent and American Indians and Alaska Natives owning 0.46 percent. That study utilized numbers from the Census Bureau’s 2016 Annual Survey of Entrepreneurs, which included all nonfarm businesses that filed IRS tax forms.

The IFA, meanwhile, is working to increase increasing minority franchise ownership through its Foundation’s Diversity Institute. David Smith is the senior manager of diversity programs and, like Carter, said the lack of knowledge about franchise opportunities is key to overcome.

“I think the biggest challenge is that aspiring minority entrepreneurs are not aware of the model in general,” Smith said. “So, we partner with diverse business organizations and host in person and virtual training events to help educate more people about franchising.”

While education is important, though, in Carter’s case, it’s just the beginning.

“The goal of what I do has many layers,” Carter said. “In one aspect, I’m working with candidates to make sure franchising is truly an opportunity for them, as it’s not for everyone. Then I help them based on a number of different tactics to zero in on the best franchise for them, based on their financial wherewithal.”

With the financial aspect, Carter assists clients in reviewing their monetary situation and provides information on sources of capital.

“We go through their financials with a fine-tooth comb and talk about what the brand is looking for in terms of initial investment, net worth requirements, all of that,” Carter said. “When we get to the point where they’re ready to move forward, I have a list of third-party lenders that I can refer them to and find which ones will be the best fit. Also, if they’re not qualified on their own, we have conversations about seeking out partners that could help them reach that ownership goal.”

Making franchise ownership accessible

In addition to outside entities, franchise brands themselves have been taking action to establish their own diversity programs. Smith said companies such as Yum Brands, Camp Grounds of America and Inspire Brands have all started programs with various incentives to attract more minority representation in their franchise ownership.

Another brand that started a program is Wetzel’s Pretzels, which launched its Access to Equity initiative earlier this year. The program, intended to boost ownership among minorities and women, began as conversations a few years ago, according to Head of Development Jon Fischer.

“We were looking at our ownership and we saw a lot of underrepresentation with the people who are our customers, particularly women, Hispanic and Asian American customers,” Fischer said. “Combined with a lot of things going on a couple years ago, as it pertains to equity across all people, we felt there was an opportunity to create a program that could help those who’re at a disadvantage and create generational wealth that comes with running a business.”

The program provides both education and training for potential franchisees, with the brand partnering with Operation Hope for the training aspect. In addition to the Access to Equity program, Wetzel’s also started its Inclusion and Ownership discount. The discount is 25 percent off the franchise fee, which ranges from $10,000 to $40,000, depending on if the owner chooses a full unit or a food truck.

Related: New Wetzel’s Pretzels Program Aims to Boost Franchise Ownership Among Women, Minorities

One franchisee who chose the food truck option is Alicia Brown, who operates in the Detroit metro area. Originally in the affordable housing industry, Brown got her start in business ownership with a fitness studio, but it was lost to a fire.

Having a passion for food and seeing the flexibility that came with Wetzel’s, Brown decided to give entrepreneurship another try and became a franchisee with the snack brand. After applying, Brown was notified that she’d be a fit for the Access to Equity program.

“I thought, ‘wow,’ all franchises should do something like this,” Brown said. “I took an eight-week business course and was able to learn about marketing, taxes, sales and legal advice. They give some discounts that help in the first year to get started as well. It gets you set up in the beginning so you can be successful.”

That opportunity to be successful in franchising is becoming more well known, too, according to Cynthia Williams, a Molly Maid owner in the Atlanta metro area. Williams, a Marine Corp. veteran, had always thought about owning a business, but had never taken the step. Instead, she worked in distribution and logistics for about 10 years.

After recovering from leukemia, though, she decided to pursue entrepreneurship and went the franchising route. After looking at several opportunities, she settled on Molly Maid, a Neighborly company. Since entering franchising 10 years ago, she said she’s seen the level of diversity in ownership rise.

“I’ve met other minority franchise owners in and outside of Neighborly, and I think it’s becoming a bigger way to get into being an entrepreneur with systems in place,” Williams said. “I’ve definitely seen the increase. More people are willing to step out and be a business owner.”

Brown said as more of the minority population becomes aware of franchising, additional brands will likely create programs similar to the one at Wetzel’s.

“Being Black, being brown, being a female, we know we can better ourselves, better our families and own a business on our own with just a little help from the franchisor,” Brown said. “I think we’ll see more growth with companies offering programs like that.”

Keep reading: Franchisors Continue DEI Efforts With Emphasis on Education  

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