June 2009 Franchising World

   Change is unavoidable and being flexible may be the key to long-term, sustainable success. 

By Maria D'Ambrosio 
      
The one thing you can always count on is change. How many times have you   heard that? Today, the notion of change is more prevalent than ever. From the new presidential administration in Washington, D.C. to globalization, technology and the economy, everyone is experiencing change.
  
Change is unavoidable and the best companies and brightest entrepreneurs make sure that they are prepared for shifts and trends within their business and their industry. A major change affecting businesses is the broad demographic shift taking place in the country. Statistics on the growth of minority communities across the United States clearly show that the face of America looks different than it did just a few years ago. Data from the U.S. Census reveals that for those 70 years old and older, the ratio of minorities to non-minorities is five to one, for those 40 years old the ratio is about two to one and at 20 years of age, the ratio is more like 1.5 to one.  
  
Also, statistics on the demographics of today’s business owners are having an impact on the United States and particularly those in franchising. According to a 2006 report by the U.S. Dept. of Commerce’s Minority Business Development Agency, minority-owned businesses grew in number at a higher pace than nonminority owned firms from 1997 to 2002. Minority-owned businesses grew 35 percent in that time period. Non-minority firms grew at a rate of 6 percent. The report also shows that there were 4.1 million   minority business enterprises generating more than $686 billion in annual sales and employing about 4.7 million people in 2002. In a May 1999, U.S. Small Business Administration study, it was reported that less than 10 percent of all franchises are owned by minorities.  
  
An Effective Strategy
For franchisors, a focus on attracting minority entrepreneurs should be part of an effective strategy for growth. The pool of entrepreneurs is growing in minority communities and the benefits of franchising are attractive to minorities. The network of suppliers, the established brand and the loyalty that comes with a franchise are advantages that can ease the comfort level of business owners, as well as lending institutions. It has been shown that access to start-up and working capital remains an issue, particularly for minorities and women.
  
Franchisors who wish to focus efforts on recruiting minority and women franchisees can take the initiative to assure that their message is being communicated in media and other venues that speak directly to these audiences. To reach minority and women entrepreneurs, it is important to advertise in magazines and on Web sites that focus on minority and women entrepreneurs. Utilizing such media sends a message that minority-business people and womenbusiness owners are welcome. It also sends a message that the franchisor sees the value in attracting franchisees from the minorityand women-business communities.   
  
Also important is having a presence within minority communities, creating relationships with minority-business organizations. These groups are valuable avenues to get a message out to the minoritybusiness community. There are both local and national chapters of such groups. There are organizations ranging from the National Black MBA Association to the U.S. Hispanic Chamber of Commerce. Whether the relationship develops at a national, regional or local level depends on the needs of the franchisor and the organization. Additionally, there are a number of business organizations that focus on women. For example, the U.S. Women’s Chamber of Commerce and the Women’s Business Enterprise Network are two national organizations that have multiple chapters across the United States.  
  
IFA Diversity Institute 
Another option, especially for those franchisors that have needs in specific geographic areas or regions is to form relationships with local Minority Business Development Agencies. The International Franchising Association’s Diversity Institute has been very successful in partnering with a number of such agencies across the United States to offer seminars to educate and raise awareness about the benefits of franchising.
  
It is also necessary for franchisors to consider the needs of under-represented groups coming into the system when expanding into minority markets. Franchisors have implemented a number of programs designed to support new franchisees. These programs include focuses on education, mentorship and networking. Some franchisors have created affinity groups to foster best-practice sharing and provide additional access to needed support and services.
  
In the hotel industry, there is a steep learning curve for newcomers entering the industry. As part of its outreach to minority entrepreneurs, Choice Hotels International, Inc., as well as some other franchise companies, has implemented an incentive program designed to benefit minority entrepreneurs. Along with financial support, there is support to assist the new hotel owner in learning the industry and getting a first venture managed effectively. Choice Hotels also established specific minority-focused owners’ associations to promote networking, mentoring and information sharing among minority franchisees.  
  
Another important aspect to consider when reaching out to minority entrepreneurs is to assure that there is support and backing from the whole franchise system. IFA has long been working to make franchise ownership accessible to greater numbers of investors. IFA’s leadership recognizes that not every prospective franchisee has the same access to capital and other resources. Proactive efforts to reach and make a franchise available to minority entrepreneurs may take extra work. Therefore, support from across the franchise system, beyond franchise sales and development is necessary.  
  
Making the Case 
To demonstrate the growth potential that exists via diversity efforts, it is necessary to make a compelling business case. Customizing the business case to the individual needs of the company is the most effective means to make the case. Many times, however, the business case can be made using the following three components:

   • Changing demographics: business owners are more likely to be minorities and women than to be non-minorities and men,

   • Customer expectations: consumers expect businesses to be diverse and have varied insights into their needs, and

   • Diversity of thought and perspective brings more robust solutions to problems.  

Statistical data from the Census Bureau shows the changing demographics as the potential franchisee is more likely to be a minority than a non-minority. This is the new, emerging market for many franchise companies. Consumers expect to see diversity. Customers want businesses to reflect the communities they serve. Customers want to see a variety of people working in the businesses that they frequent.
  
Diversity across an organization, from the rank-and-file to senior management to franchisees brings better solutions to problems, brings a broad and effective approach to the future. More robust and healthy discussions of all possible answers will more likely happen when there is diversity of thought and perspectives around the table.
  
Franchisors seek to diversify their franchise base as an opportunity for growth. They are broadening the pool of potential franchisees by their efforts to recruit in new and emerging markets. As this trend develops franchisors must set a strategy for success in these efforts that includes marketing, relationship building and support for this new group of franchisees. These diversity efforts must be supported throughout the company to assure success. Business as usual may not be the case. Changing the way things are done may be necessary. But change is unavoidable and being flexible may be the key to long-term, sustainable success.  

Maria D'Ambrosio is senior director of inclusion and diversity for Choice Hotels International. She can be reached at 301-592-6258 or  maria_dambrosio@choicehotels.com  . 

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