Diversity On The Rise

By Earsa Jackson, CFE

The success of any business is often measured by how efficiently it responds to change. The changing demographics in the United States present a unique opportunity for franchise brands to expand into once under-represented communities and reach untapped talent. By 2050, the Hispanic population in the United States is expected to make up nearly 28 percent of the population. During this same period, the African-American population is expected to make up just less than 15 percent of the population.  Between 2020 and 2050, the non-Hispanic white population is expected to drop from approximately 60 percent to just less than 47 percent. This rise in minority demographics should be considered an opportunity to expand a franchise into new, profitable territories.

Today’s footprint 

IFA’s mission is to protect, enhance and promote franchising. There are more than 733,000 franchise establishments that support nearly 7.6 million direct jobs, $674.3 billion of economic output for the U.S. economy and 2.5 percent of the Gross Domestic Product (GDP). IFA members include franchise companies in more than 300 different business format categories, individual franchisees and companies that support the industry in marketing, law, technology and business development.

Diversity Institute mission

Diversity and inclusion have the power to accelerate the mission of franchising. IFA’s Diversity Institute was created to capitalize on this power and outline best practices for its member companies, both in external business development and internal industry optics. The Diversity Institute serves as a key catalyst for promoting and fostering diversity and inclusion within franchisors, franchisees, suppliers and employees, and realizes that the rapid pace of demographic changes and population growth create both a unique opportunity and challenge for business expansion.

The Institute houses the IFA Foundation’s groundbreaking diversity and inclusion services – education, research, scholarships and access to additional national organizations. Through these, the Institute provides franchise ownership training to under-represented populations and cultivates a convenient place for minorities to explore franchise opportunities with companies actively recruiting multicultural franchisees.

By the numbers

On March 9, 2018, the Institute introduced a new study commissioned by the IFA Foundation, “Franchised Business Ownership by Minority and Gender Groups.” This study was conducted by PricewaterhouseCoopers (PwC) and designed to study the extent of minority and women ownership of franchised businesses. This is the third study of its kind, and the report provides a comprehensive look at franchise ownership rates among various minority and gender groups. The previous two reports, both prepared by PwC for the Foundation, were based on 2002 and 2007 Census data.

This new report is based on 2012 Census data and answers two key questions:

(1) What percentage of franchised businesses are owned by a minority group member, by females, and equally-owned (male/female)?

(2) What percentage of minority-owned businesses are franchised?

The Institute is pleased to report both an increase in the rate of franchise ownership by minorities and women. Minorities were more prone to own franchised businesses as opposed to non-franchised businesses. Below are some of the key findings:

• There is a higher minority ownership rate among franchised businesses than in non-franchised businesses. 
• Since 2007, there has been a 50 percent increase in minority ownership for franchise businesses.
• Nearly one-third (30.8 percent) of franchises were owned by minorities, compared with 18.8 percent of non-franchised businesses. 
• Asians owned 11.8 percent of all franchises compared to 6.3 percent of non-franchised businesses.
• Hispanics owned 10.4 percent of all franchised businesses compared to 7.2 percent of non-franchised businesses.
• Blacks owned 8.0 percent of all franchised businesses compared to 4.7 percent of non-franchised businesses.
• Between 2007 and 2012, female ownership among franchisees also increased by nearly 50 percent.

As this report demonstrates, the dynamic growth of franchising has created more opportunities for both women and minorities. IFA is working to meet the future challenges of a rapidly growing and diversifying franchise sector coupled with shifting demographics.

IFA members actively encourage their own organizations to consider diverse backgrounds, culture, gender, race and ethnicity to win new franchise owners, new employees and new customers. Here are some practical tips for any brand desiring to expand its diversity footprint:

1). Assess where you are currently on diversity and inclusion efforts. Take a true inventory of diversity and inclusion across your system. Is there a large disproportionality between your customer base and your franchisee base? This might help identify prospects and communities you might tap to recruit new franchisees.

2). Identify opportunities to partner with other organizations to assist with locating interested and qualified candidates. Considering partnering with national organizations with a diverse membership base that can help identify potential franchisees within its base. The Institute can assist with connecting you to such organizations.

3). Set tangible goals. Setting some tangible goals will permit you to track your progress. Some of the goals should be effort-based while others should be actual results. Remember that actual results will take some time, but you must start some place.

Diversity think tank

The Diversity Institute is launching a Think Tank designed to encourage open dialogue among members about challenges, opportunities and successes with diversity and inclusion initiatives. The Think Tank is open to companies at any stage of the process – from those with mature diversity and inclusion initiatives to those with no initiative at all.

Earsa Jackson, CFE, is a Partner in the Dallas-based law firm Strasburger & Price and the first vice chairwoman of the IFA Foundation’s Diversity Institute. Contact Earsa about the Diversity Institute at[email protected] or 1-214-651-2394.