Franchising World June 2012

By: Maria D’Ambrosio

Benjamin Franklin said, “When you’re finished changing, you’re finished.”  How true. Organizations must remain flexible, innovative and open to change to survive the record-breaking speed of technological advances and changes in the economy and social environment.  This is true for franchisors as well.
Every part of business is impacted by change.  Customers are more different today than ever before.  Think about your next pool of franchisees. Do you need to look for franchisees in places that are different from the last place you looked?  Consider what the U.S. Census Bureau is telling us about business owners today.

Tom Mesenbourg, deputy director of the U.S. Census Bureau said, “Just as the 2010 Census has documented our increasingly diverse population, so too the Survey of Business Owners demonstrates the increasing diversity of U.S. business ownership.”  Every five years the U.S. Census Bureau administers a survey on business ownership.   Let’s take a look at the most recent report from the 2007 survey results.
In 2007, all U.S. businesses increased by 17.9 percent.  This is only about one-half the rate of growth of minority-owned firms, which increased by 45.5 percent from 2002 to 2007.  This represents more than 20 percent of the nation’s 27.1 million firms.  

A franchisor’s primary customer is the entrepreneur.  Minority communities, including African American, Hispanic, Native American and Asian, are producing entrepreneurs with a myriad of interests and talents.  Franchising is appealing to this community of potential franchisees.
An International Franchise Association report released in December 2011 indicates that in 2007 there was a higher minority ownership rate among franchise businesses than non-franchise businesses.  Minorities own 20.5 percent of franchise businesses in the United States compared to their ownership of 14.2 percent of non-franchise businesses.  Minority entrepreneurs warrant serious consideration as a new market for franchisors. 

Expanding the Pool of Prospective Franchisees
There are a number of franchisors who have seen the potential growth opportunities that exist by reaching out to minority entrepreneurs.   This new market has proven to be an avenue for growth and is returning results.  Insights from a few franchisors finding success in this market may be helpful in expanding your pool of potential franchisees.

Choice Hotels has been named one of the Top 50 Companies for Franchising by the National Minorities in Franchising Initiative or NMFI for a number of years.  At Choice Hotels, a dedicated resource for reaching out to minority entrepreneurs is part of the Franchise Development team.  “We find ourselves tapping into markets that other salespeople won’t touch,” says Isaac Brown, director of franchise sales at Choice.  His role is to act as a conduit linking a budding hotel owner to a salesperson.  He fills in the gaps for the potential franchisee by providing education and insight into the hotel industry, as well as franchising.  By the time the salesperson is introduced to the candidate, both parties are ready to start the sales process.  
When asked about tapping into the market of minority entrepreneurs, Brown had three specific tips.

1. Connect with business or professional organizations.
2. Build relationships and trust.
3. Provide support along the process.

Brown suggests that you research minority business and professional organizations.  These organizations provide access to great pools of candidates.  He shared, “It is important to do your due diligence on an organization. Get to know what they are all about, know their mission, know what they are trying to accomplish so that you can tailor your approach.”  

Sponsor a lunch or dinner with a group or put an ad in their magazine or newsletter.  At first, let them know who you are and what your company has to offer.  Provide basic information, such as initial costs, the support services you offer and success stories.  Invite a successful franchisee who looks like them to tell her own story of success with your concept. 

Brown cautions, “Have patience and concentrate on building relationships by being honest and authentic.”  Finally, he suggests that you get involved in the community.
 

Outreach to new markets and being prepared for change is always a good idea.

FranchisEsource Brands International is another franchising company that has found success by reaching out to minority and women entrepreneurs.  Karen Powell, CFE, CEO and founder of Decor&You, one of the FSBI family of brands, says FSBI realized that many of the attributes of their franchise concepts would be attractive to women.  They capitalized on sharing this information by advertising in Working Mother magazine.  This advertising proved successful, bringing them a number of leads.  Additionally, they used some public relations tactics to continue to share their story.  

It was in 2008 that FSBI was named as one of the Top Most Affordable Franchises by Black Enterprise magazine and then in 2009 was named a Top Company for Franchising by NMFI. 

 Another tactic that has proven quite successful is the creation of the non-profit Women Empowered by Business, whose mission is to promote successful entrepreneurship among women by providing opportunities and resources designed to educate, empower and enlighten them as they embrace the challenges of business ownership. 

When Powell was asked for tips on reaching out and attracting minority and women entrepreneurs, she offered:

1. Go where they are.
2. Focus on education and raising awareness and consider offering seminars and webinars.
3. Invest in public relations—start talking about what you offer.
4. Communicate with inclusive language and by having inclusive conversations.

Another franchisor named previously to the Top 50 Companies for Franchising by NMFI is Jack in the Box Inc.  Its specific outreach to minority communities has proven beneficial as it looks at non-traditional venues for its Jack in the Box and Qdoba Mexican Grill concepts.  These channels include airports, universities, travel plazas, military bases and more.

 Abby Whetstone, non-traditional development director, said that these non-traditional venues have barriers to entry and it is important to understand what those are.  However, these venues also provide opportunities available specifically to Disadvantaged Business Enterprises or DBE-certified companies.  Minority ownership is one dynamic of a DBE certification.  Whetstone explains, “In the case of airports, many of them implement an Airport Concession Disadvantaged Business Enterprise concession plan with percentage targets under which qualified firms (those owned by women or minorities with less than a certain personal net worth) may have the opportunity to operate in the airport.”   Therefore, when opportunities arise at airports to fill their retail/restaurant space, a certified DBE business may be in a better position than a non-certified business (or a partnership opportunity may exist).   Whetstone also said that her company is encouraging qualified, existing minority-owned franchisees from both brands to apply for their DBE certification in their home city/state.  “We believe that raising the awareness among our franchisees that these opportunities exist is a win-win-win for all of us,” she said. 
Whetstone shared the following:

1. Be open to the new opportunities that exist in non-traditional venues. 
2. Networking is key—get to know the players in this space. 
3. Have a focus on diversity across the organization.

By this time next year, we will have greater insight into the landscape of minority business ownership.  The U.S. Census Bureau will have shared its results of the 2012 survey.   But no matter what the numbers show, outreach to new markets and being prepared for change is always a good idea.  

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