News Column

Franchise Growth Through Diversity: IFA's Role

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A growth strategy that fosters and encourages inclusion of minorities in franchising is clearly a two-way street. People from a variety of cultures and ethnic groups can now turn to franchising for opportunities for business ownership and employment. In return, franchise companies can attract more consumers, franchisees and employees as they learn and earn from emerging markets.

But there's still a long way to travel. The latest U.S. Census figures reveal that of the 275 million Americans, 71 percent are Caucasian, 13 percent are African American, 12 percent are Hispanic, 4 percent are Asian and 1 percent is Native American. Presently there isn't an accurate survey that assesses minority representation in the ranks of franchising, but the percentages are believed to be somewhat lower. What's more, most franchise companies have only recently begun to extend their reach beyond traditional boundaries to these large and growing market segments.

Untapped resources, Endless possibilities

Hispanic. African American. Asian. Native American. Under these all-encompassing group headings are an infinite variety of people from various cultures. IFA President Don DeBolt believes the same can be said about the franchise community. "When most people think of franchising, they still think of only one thing-fast food." DeBolt believes the biggest challenge the franchise community faces is to communicate to people within new marketplaces the breadth and scope of choices franchising offers. "There are enormous opportunities in the area of services, for example. And there are also retail concepts that are affordable that are eager to have a presence in new territories," he adds.

DeBolt emphasizes that there are a countless number of concepts that can be operated from the home and he believes that discovering the right franchise is key and that choosing wisely means finding a concept not just because it promises financial rewards, but also because it matches a person's interests and qualifications.

Money Matters

DeBolt points out that in emerging markets, as elsewhere, it's often easier to finance a franchise than it is an independent start up because of the track record and business projections that franchise companies provide.

He warns that lack of funding is too often blamed as the single most important barrier to entry. But he says there are other hurdles to overcome if franchising is to become truly inclusive. Management skills must be developed and a greater understanding of franchising must be achieved through education. "It isn't simply a matter of writing a check," he says.

In the short term, the IFA is continuing to communicate the availability of funding through the SBA. It is also creating awareness of the growing number of "boutique" sources providing funds to minorities looking to become franchisees.

Capital Gains

Nowhere is the franchise community's interest in minority issues more apparent than in its recent reaction to the request for contributions to the capital campaign for the IFA's Educational Foundation-the education and research arm of IFA.

In 1999, Sidney Feltenstein, chairman and CEO of Yorkshire Global Restaurants, headed up the drive to build The Franchising Community Fund to ensure that franchising attracts the besttrained workforce, the best and brightest franchisees and the best corporate managers and support systems. The goal of the campaign was to raise $2.5 million to bring the fund level to $5 million. In the process, the IFA discovered that its member companies and suppliers had specific areas of interest.

"One of those areas was outreach to the minority community in the form of educational programs, research and diversity training," comments John Reynolds, president of the IFA Educational Foundation. In particular, three companies stepped forward to create special programs. "At the end of the day, we reached our goal and had roughly $600,000 devoted to minority development," Reynolds continues. "We realized that we'd tapped a vein among companies that recognized that there is much to be done in this area."

Among the projects are:

PepsiCo Inc.

A grant of $250,000 from the softdrink company is currently funding a multi-faceted initiative that is studying companies that have minority outreach programs in place to identify best practices, and providing scholarships to African American, Hispanic, Asian and Native American students looking to pursue careers in franchising. Instituting educational programs at the high school and college level that include instruction, field trips and projects focused on franchising is also a key component of the grant.

The research project is currently underway, scholarship notices have been issued and pilot programs are being conducted at the high school level in conjunction with Distributive Education Clubs of America and with Students in Free Enterprise, a collegiate educational program for future entrepreneurs and business leaders.


An equally generous contribution came to the IFA from Coca-Cola for the purpose of establishing a Diversity Training Institute geared to the franchise executive. The institute will provide virtual on-line training programs as well as actual regional seminars, collateral materials, an awards program and more. Many IFA members have already enrolled in Diversity Today, Inclusive Organizations Tomorrow, a one-day seminar presented by diversity expert Mauricio Velasquez, president of the Diversity Training Group.

In addition to a series of such seminars conducted around the country, the Institute will conduct research to discover best practices and case studies and make results known in a resource kit available to IFA members. Next year, as training and awareness continues the institute will also recognize, in an awards program, those companies that have distinguished themselves in this vital area.

Marriott International

A $150,000 grant from Marriott International will enable minority college students and adults enrolled in programs that will benefit their future in franchising to receive tuition assistance. Students can already apply for scholarships through this on-going program.

Developing Lasting and Mutually Beneficial Relationships

Thirteen years ago, the IFA and its members recognized that the future franchise growth would depend upon an awareness of ethnic markets and an understanding of diversity issues. As a result, the association created a staff position dedicated to doing precisely that.

Recently, Sonya Brathwaite was appointed as director of diversity and emerging markets within the U.S. Her charge is to inform the public about the opportunities in franchising for employment as well as franchise ownership. At the same time, she will serve as a resource for members as they expand their traditional horizons and welcome new members to their franchise families.

A Ladder for Success

In the early 1990s, the IFA also developed the Minorities in Franchising Committee. In 2001, Leon Oldham was appointed its chair. Today the Atlanta-based former AFC Enterprises special assistant to the CEO and director of minority affairs is orchestrating a number of programs designed to promote awareness of franchise opportunities within minority communities.

In partnership with Black Enterprise magazine, the MIF Committee is developing a series of two-day seminars for business majors at five of the country's leading colleges where enrollment by African Americans and Hispanic students is high. Due to roll out in 2002, these seminars will promote awareness of the franchise business model and hopefully spark an interest among attendees to pursue franchising as a career.

Whereas a college student might be recruited into a managerial level positions, Oldham thinks there are still considerable opportunities for people who haven't benefited from a college education to work up through the ranks of a franchise chain. An ambitious employee can progress to become "A manager of a restaurant can earn upwards of $30,000. He or she would then be responsible for a staff of 10 to 20 people and a business grossing from $600,000 to $1 million a year. Not too many people today are running million dollar companies," Oldham remarks. "A district manager could be overseeing six times that number."

This kind of on-the-job exposure to front and back room operations is often coupled with classroom training and onsite support for employees who decide to become franchisees through ownership programs created by individual franchise companies.

Oldham himself got ahead by working within the franchise system. "I know these opportunities exist but it's difficult convincing people to come on board when the culture puts down fast-- food franchise workers," he says. He hopes his crusade on behalf of the franchise community might result in increased awareness and sensitivity so that there isn't a stigma attached to employees pulling themselves up the old fashioned way-by the proverbial bootstraps.

IFA has already created some of this awareness through its on-going efforts to communicate minority successes and issues both internally and externally. One such story in a recent issue of Black Enterprise magazine emphasizes that many franchises are surprisingly affordable. Franchise companies throughout the country that have developed their own minority outreach programs are joining the chorus and making the franchise diversity message even stronger.

Building Strategic Alliances

Like most nations, the U.S. has many economically disadvantaged areas. But franchising provides rays of hope. In an effort to keep the spotlight on the educational programs and financial partnerships that encourage minority participation in franchising, Marcel Portmann, vice president of Emerging Markets and Global Development creates strategic alliances with organizations that reach out to similar populations in designated economic development or empowerment zones.

The National Congress for Community Economic Development, the SBA, Businesses for Social Responsibility, the New Jersey Economic Development Authority and the U.S. Department of Agriculture's Department of Rural Business are among the groups that are eager to work with franchise companies in order to jump start flagging economies in designated empowerment zones.

If the name of the game ultimately is the bottom line, franchising can be a winning ticket-a way up for people within emerging markets and a way in for forward-thinking franchise companies.

This fall, key members of the franchise community are hoping to meet with the Congressional Black and Hispanic Caucuses in Washington, D.C. to discuss this mutually beneficial relationship. Key representatives from the franchise community will be on hand to discuss how the franchise model can work to jump-start the economy in urban and rural economic zones across the country.

And that's only one of such meetings that highlighted IFA's hectic fall schedule calendar. In October, Portmann led an IFA seminar given in partnership with the New Jersey Economic Development Agency. "There are retail strips in this casino city that local officials would like to see developed by minority entrepreneurs," he says.

Following this conference, Portmann will attended others in New Jersey. Then went on to the Congress on Community Economic Development in Pittsburgh and the Franchise Expo of the Americas in Miami for a seminar for the Hispanic market.

Portmann explains that federal, state, county, city and private lending sources are leveling the playing field for minorities in franchising, and franchise companies are eager to open their doors. Disposable income in economically disadvantaged areas may be lower when measured in individual terms, he explains, but collectively there is tremendous buying power. And there are even greater rewards on the horizon. "There's a trend to bring people back to the cities through urban revitalization efforts," Portmann states.

From Globalization to Localization

At the end of the last century, franchise companies extended their reach into the far corners of the globe and used sophisticated technology to stay in touch. As a result, the world of franchising became bigger and smaller at the same time. Portmann feels globalization and the expansion of the Superhighway have both exposed franchise companies to new ideas and cultures. And vice versa. "Companies couldn't be successful in their expansion efforts if the consumers didn't first give them the right to be there," he points out. The same is true of companies entering new markets here in the U.S.

"Franchising is a method of expansion and it's working locally at the community development level just as it has globally," he says. As the road to inclusion penetrates emerging markets and incorporates people from diverse cultures into the franchise family the face of franchising is changing. As the decade of diversity progresses, franchising will never look quite the same way again.

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