News Column

Chain Lightning

May 2005, HISPANIC BUSINESS Magazine

Dale Buss

Gina Martinez
Gina Martinez

Two years ago, Hector Heras began selling franchises for his family's Mexican-restaurant chain.

"We sold our first franchise in April 2003, and now we have 37 store commitments to open in different markets in Texas and Denver and Arizona," says Mr. Heras, whose El Taco Tote began in Mexico and expanded to El Paso, Texas, nine years ago.

Gina Martinez, founder of a two-year-old cooking school for kids in Morristown, New Jersey, also is among those who have turned to franchising their own businesses. "I knew that the concept was innovative and that the timing was right, with so many kids in this country fighting obesity," says the 39-year-old Cuban-American founder of Viva the Chef.

Turning down an offer from Cendant Corp. to sell the concept, Ms. Martinez says she instead moved to franchise it herself, charging an initial franchise fee of $45,000. She received more than 2,000 applications and already has sold 27 Viva the Chef franchises.

Mr. Heras and Ms. Martinez are among what experts say is a steadily growing number of Hispanics building franchise businesses – both as franchisors and franchisees – across the United States. While statistics are elusive (most of the country's 2,200 franchisors don't track their franchisees by race or ethnicity) experts say Hispanics increasingly are participating in this thriving business sector, which includes 760,000 franchise owners, generates an estimated yearly revenue of $1.5 trillion, and accounts for almost 10 million jobs.

"[The franchise industry is] entering a new phase where Hispanics' success in running franchises has become a mainstream thing," says Sonya Brathwaite, director of diversity and U.S. emerging markets for the International Franchise Association, a Washington, D.C.-based trade group. "Now, more Hispanics also are coming in at the franchisor level where they're franchising their own concepts successfully."

Several Hispanic market leaders already are familiar names in franchising. Linda Alvarado of Alvarado Construction also runs Palo Alto Inc., a multi-unit Taco Bell and Pizza Hut franchise company. Lopez Foods, number 11 on the 2004 Hispanic Business 500®, is led by John Lopez, a former McDonald's multi-unit franchisee who now is a key vendor to the McDonald's franchise system. Cuban-born Al Cabrera operates 218 Burger King restaurants across the South and Midwest. And Ralph Alvarez, who began his career as an executive at Burger King and Wendy's, is president of McDonald's North America, responsible for over 15,000 restaurants across the United States and Canada.

And experts say more can be expected. While costs may be prohibitive for some – anywhere from $30,000 to millions of dollars for a single franchise – franchise companies increasingly are launching aggressive Hispanic outreach programs. McDonald's has long fostered a support network and franchising system for Hispanic franchisees. Hotel franchises including Cendant (Travelodge, Ramada, Days Inn, and others), Accor (Red Roof Inn, Motel 6), and Choice Hotels (Comfort Inn, Econo Lodge) provide incentives such as forgivable loans to qualified minorities. And even smaller franchise companies such as Pizza Patrón, a carryout-only pizza chain that caters to the Hispanic community, are aggressively recruiting Hispanic involvement.

McDonald's has nearly 180 Hispanic operators with a total of almost 800 stores. And the company says it plans to boost those numbers as overall growth improves. "Virtually every Hispanic American is a customer of McDonald's, but we've only got 6 percent Hispanic ownership of our stores," says Alex Mestas, a McDonald's franchisee in Southern California and western division vice-president of the McDonald's Hispanic Operators Association. "Our goal is to really improve that," he says.

Such growth will come partly through a new focus on "emerging Hispanic markets" in states such as Georgia, North Carolina, and Tennessee, Mr. Mestas says. The company also has begun to relocate existing Hispanic owner-operators from traditional strongholds such as Florida and Texas to developing areas such as Atlanta and Louisville, Kentucky.

Many multi-franchise success stories begin with a single step. Tony Manos, for example, bought his first Domino's franchise in the early 1990s. Soon, he says, the company was helping him buy troubled franchises in Southern California to turn around. Today, Mr. Manos and his partners now own 50 Domino's franchises.

"We have doubled the size of our office and the number of our administrative personnel since last summer," he says.

Joshua Gamez, 27, established a franchise of U.S. Lawns, a commercial lawn-service company, four years ago. Now, his operation in Bridgewater, New Jersey, has grown from two employees to more than 45.

In 1996, Salomon and Dorita Ojalvo opened a franchise of AlphaGraphics, a fast-printing company, in Pompano Beach, Florida. The couple recently made a seven-figure investment in a new, larger building and plan to move in October.

At age 23, Catherine Pena is Smoothie King's youngest franchisee ever. "It's a little surreal sometimes," she says of her Corpus Christi, Texas, business. "I've thought about this from the time I was 16, and I just look around and say, 'This is mine.' "


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