Diversity in Hospitality Franchising: Why It Matters

By Stephen P. Joyce

In an increasingly well-connected world, the diversity of the entrepreneurial community—of its thoughts, of its ideas, its backgrounds and experiences—is not only growing in numbers, but also simply in visibility and importance. Diversity covers all aspects of the hospitality industry and it’s not just “the right thing to do”—it’s good for business too. It’s simply smart business to focus on diversity and address it in an active way. While there has been much discussion in the past decade on the business case for diversity and why it’s important to the bottom line, the future discussion on diversity in franchising is beginning to look toward just how important diversity is. If anything, the level of impact that diversity can have in the franchising world, and specifically hospitality let alone across industries, has been seriously underestimated. A more diverse community of business owners can drive a more successful business environment for us all.

Sustain and Grow Your Business, Franchisee Base

Companies are looking to ensure that they are tapping into all markets as they look to sustain and grow their business and their franchisee base. In the hospitality franchise community, the growing number of entrepreneurs and potential franchisees who identify as African American, Asian, Hispanic or Native American is a major consideration. Census data has also been able to convince many franchisors that multi-cultural entrepreneurs are a key growth area, a market segment that they need to focus on to find their next franchisee. Yet diversity is also inclusive of all that’s different, it’s being open and accepting of all new ideas, looking beyond the traditional. Companies are making an effort to reach out to a more diverse pool of entrepreneurs by every definition to demonstrate the benefits of franchising within the hospitality industry. Forward-thinking corporations have realized that their work forces need to reflect their desired customer bases so that they know how to better appeal to that base. At Choice Hotels, we strive to ensure that our associate base is diverse, as well as inclusive—inclusive of all cultures, backgrounds and perspectives—and we try to promote that same diverse and inclusive environment among our franchisees.

Integrating Diversity

So how exactly are companies approaching this phenomenon? How are they strategically integrating diversity into their business? Many hospitality corporations have rolled out fully-dedicated teams whose sole focus is on recruiting and retaining emerging minority and nontraditional hotel franchisees. Many also provide a number of resources and networking opportunities for their minority franchisee base through the existence of various minority hotel owners’ associations. Franchisors are also working competitively to attract minority franchisees to the hospitality business with lucrative development offers and incentives. Even during the recent economic downturn, hospitality franchisors like Choice Hotels were able to place an even greater focus on key diversity and inclusion initiatives such as emerging markets and minority franchise development, diverse B2B alliances, diversity-focused supplier partnerships and multicultural marketing strategies. Basically, today’s hospitality franchisors have to adopt a holistic approach to diversity, because diversity should be integrated across business functions. Ensuring that a company is tapping into the broadest pool of global franchisee talent is imperative.

Minority Franchisee Incentives

The entire hospitality franchising industry will continue to raise the bar in its efforts to attract the most diverse set of franchise owners to the segment that calls for growth at that time within the industry. Illustrative of the importance of diversity to modern franchisors, many companies now offer competitive minority incentive programs to further demonstrate their commitment to diversity among prospective franchisees. These minority franchisee incentive programs, aimed toward new hotel developers, are designed to help reduce upfront costs and provide additional support. A select few incentive programs currently in the market offer unparalleled advantages such as generous per-room incentives and steeply-discounted affiliation fees. Programs like these not only show the hospitality community’s commitment to franchise diversity, but also offer real benefits to promote African American, Hispanic and Native American ownership by providing much needed support and backing. Increasing the number of underrepresented minority owners in the hospitality franchise system is a key corporate initiative for many organizations. Hispanics currently own less than one percent of all U.S. hotels, according to the Hispanic Hotel Owners Association, so needless to say, there exists an enormous opportunity for growth within that segment. However, thanks to the mere existence of organizations such as HHOA, this emerging market group can receive the invaluable resources and tools, as well as the mentoring and networking opportunities they need to succeed. Other financial assistance and networking resources exist for future hotel franchise owners in the form of the National Association of Black Hotel Owners, Operators and Developers and the Asian American Hotel Owners Association, to name a few. What’s more, several hospitality franchisors have similar organizations set up exclusively among their own franchisee base. The recent and rapid growth of organizations like these represent the true power that the future of diversity in hospitality franchising holds. It’s also important for hospitality franchisors to educate their current franchisee base as a whole on the value of diversity. For instance, Choice Hotels recently started a program called the “Small Business & Diversity Ownership Certification Education Program” that is a spinoff of the company’s larger corporate supplier diversity program. This new program educates Choice Hotels franchisees of the value of supplier diversity and the benefits for hotel properties in being identified as small businesses, minority-owned or woman-owned businesses. 

Additionally, the majority of hospitality franchisors today offer dedicated teams that work to attract and build long-lasting relationships with emerging minority and nontraditional hotel owners. These dedicated teams are looking to bring in minority entrepreneurs and investors who are new to the lodging industry and interested in diversifying their investment portfolio. Most of the time, if an entrepreneur already owns a successful franchise or business, then he or she already has the skill set needed to be successful in the lodging industry and hospitality franchisors help to enhance those skills by providing one-on-one attention to each and every potential customer that comes to them. While it’s always a challenge to develop a new business, it can be a great deal easier if an owner picks a large franchise organization with a strong track record in working with franchisees of varying backgrounds and experience levels. But with the many franchise options that exist for today’s diverse population of entrepreneurs, some may wonder, “Why hotels?” While the barriers to entry for the hotel industry may be slightly higher than quick-service restaurants, which are often a great launching pad into hospitality, the potential returns are much higher. Real estate investments such as hotels can be a wealth-building asset and can provide the kind of resources that create a legacy for one’s family. Lodging has proven to be a highly successful industry and it continues to grow. Revenue, return on investment and profits are increasing steadily and owning a hotel franchise can potentially be a great opportunity when looking to build equity in tangible real estate and creating long-term investment value. Not unique to the hospitality industry, current and prospective franchisees are a franchisor’s main customer. It is the responsibility of hospitality franchisors, and the franchising industry overall, to share the business case and raise awareness of the imperative to reach out to a more diverse group of potential franchisees. They need to promote a focus on diversity through all their customer-centric efforts, on looking beyond the traditional to find the next franchisee or owner.

Stephen P. Joyce is president and CEO of Choice Hotels International, Inc. and serves as secretary on IFA’s Board of Directors. Choice Hotels International, Inc. franchises more than 6,100 hotels, representing more than 495,000 rooms in the United States and more than 30 other countries and territories. He can be reached at 301-592-5032.