Their focus has mainly been on food "because it's the first thing people looking into franchising think about," says Mr. Portmann. "One of our tasks is educating emerging entrepreneurs that there are 75 different industries out there, and not to think only about fast food, which just happens to require the highest investment because you need the real estate.
"Services such as commercial cleaning or residential cleaning are great alternatives because, in fact, many of these services are already franchised and employ Hispanics and other minorities. Typically [cleaning franchises] are more accessible because their fees are for know-how, and the rest is for equipment and maybe some type of vehicle. The investment is not as high as it would be to put up a McDonald's."
That brings us to cost, perhaps the biggest deterrent to minority franchise ownership. Franchising can be an expensive proposition. Expenses include fees, royalties, supply costs, employee salaries, and real estate. The size of the tab ultimately depends on the industry.
"You can get into a franchise for $10,000, or up to multi-millions if you move into the hospitality sector," Ms. Thilgen says. "In the food industry, you have a range, depending on whether it's a coffee kiosk in a mall to something that is going to require more build-out. It's all over the board. Even within some industries you might see a huge range, because franchisors are getting very creative in going to nontraditional locations. For instance, having a Pizza Hut in a mall versus opening one in an airport. At the airport it's smaller, so therefore the investment is different."
As a result, financing – how much and how easily it's obtained – plays a huge role in the diversification of franchising. Financing options are as varied as franchise opportunities themselves (see next story). Bank loans or lines of credit, government loans, and even help from the franchisors all are possibilities.
"Access to capital and financing options are probably the main barriers to any development, although we do have some options and programs in place to help develop that end," Mr. Portmann says. "Franchisors are realizing that this is an area of good development and there have to be some concessions made. Some of them are already putting programs in place that are very good, not just for Hispanics but for any minority group. Some of them waive the franchise fee, or at least lower it. Some will do financing internally. There is definitely more outreach. We are seeing it in our program."
Mr. Portmann singles out fast-food powerhouses such as McDonald's and Tricon, the owners of Taco Bell, KFC, and Pizza Hut, as being among the most progressive in terms of diversity. But some smaller franchisors also are starting to recognize the benefits of reaching out to minority communities.
"It's a matter of planting a seed, and the impression you give out to the minority community," he says. "If you are not helping the community – not lowering your fees or giving advantages – the rest of the community will say, 'Look, don't even talk to these guys, because they are not flexible and they won't work with us.'"
Because he wanted to keep his retirement nest egg secure, Mr. Otero opted to get a credit line from his bank by borrowing against his home. With no major overhead, he has long since closed that line.
"Being your own boss – nothing beats that," he says. "I don't think I could ever go back to being an employee of any company. They would have to offer a lot of money for me to even consider it."
As he continues to build his Pillar to Post franchise, Mr. Otero has this advice for other Hispanics who decide to follow in his footsteps.
"You have to hang tough and you have to take the job seriously," he says. "There is no magic wand. If you want to make money, you have to work your tail off. Don't expect miracles overnight. When you decide to go with it, you have to research the industry, the business, the competition. And – most importantly – you need to know whom you're getting in bed with."
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