Minority, Women Entrepreneurs Find More Opportunity in Franchise World

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Barbara Brixton believed she had two strikes against her as she planned her business career: She is a woman and she is African-American. What’s more, she knew she wanted to do something in the food service industry. Her years as a teenager waiting tables at a local diner taught her the pleasure of serving people their meals – but restaurants, everyone warned her, were risky endeavors. Brixton realized the hurdles she’d have in starting something new, so she took a different route: opening a franchise.

The 32-year-old spent a few years after college living with her parents in Houston to save up, all the while stopping in regularly at the chains she loved (Ruby Tuesday, McDonald’s and Chik-fil-A among them) and kept an eye on a site called where franchisees list their outlets for sale.

Ultimately, she was able to take about $300,000, including some seed money from her family members, her savings and some loans, to buy an existing Schlotsky’s Deli outlet.

“I don’t think the lenders would give me the time of day if I had come in trying to borrow as much as I did for my own sandwich shop,” she said. “But this is a proven business with a track record. As a first-time owner, I think it’s the best way to go.”

She’s not alone. In a trend referenced by Louisiana State University researchers Aaron Gleiberman and Rebecca Rast in a paper presented at a 2016 Marketing Educators Association convention, minorities now own 21.1 percent of franchises with at least five workers, according to data derived from the U.S. Census by the Small Business Administration. That’s up from 15.8 percent in 2007. It also far outpaces the general rate of minority business ownership, which was 13.3 percent overall in the most recent data.

Related: How Hispanic Entrepreneurs are Making an Impact in the Small Business Community

This trend, Gleiberman and Rast assert, is a prime opportunity for business schools to advance the cause of diversifying the ranks of the nation’s business ownership by teaching courses specifically about franchising.

“Usually it’s taught as a chapter or a subsection of a retailing class or a marketing management class because franchising, from a larger marketing perspective, is about the governing structure of a firm,” Gleiberman, an LSU economics instructor, said in an interview. “The entrepreneurial aspect of it is kind of underrepresented in schools, I think.”

Or, as the duo put it in their paper: “In particular, women, minorities and other underrepresented groups tend to gravitate toward the franchise business model in the proverbial ‘real world,’ and educators should be prepared to offer these students an avenue of exposure in a classroom setting.”

Michelle Rowan, the president and COO of the consultancy Franchise Business Review, strongly agrees. FBR recently published the result of a survey of 6,400 female franchisees and found a remarkably high level of work satisfaction. The poll found an average annual income of $63,000 and that 74 percent said they’d “do it again knowing what I know now.” For some reason, female franchisees say they worked 44 hours a week, versus 48 hours a week for male counterparts.

While no comparable data was available for non-franchise business owners, all of that adds up to a more positive opportunity and one that more women and minorities ought to learn about, Rowan said.

“Franchising definitely should be focused on more in schools, and think we’re starting to see more coursework,” she said. She and FBR CEO Eric Stites “just did something with the University of New Hampshire – they have a franchising class that they do, but it’s one class. UNH business school is this huge school and it’s very introductory 101 level class.”

There are myriad reasons why franchising is more amenable and accessible to minority and female entrepreneurs, Gleiberman and Rast report. For years now, growth in the gross domestic product from franchises outpaced that of the broader GDP for the United States, so it’s a safer bet than other business opportunities. “With such an impact on the growth of the U.S. GDP and employment numbers, it is quite a mystery as to why this business format receives such little focus in business curriculum, and in particular marketing, still to this day,” they wrote in the report.

Indeed, while many entrepreneurs dream of starting up their own brands or translating their creative ideas into big business, the risks are high. Financing opportunities, then, are more accessible, they said.

“Disturbingly, women own approximately 40 percent of small businesses in the U.S., yet receive a mere five percent of the equity capital and only 12 percent of the overall bank credit provided to small firms,” Gleiberman and Rast wrote. “Similar disparities exist between the black and ‘non-minority’ groups. Franchising provides a credibility to the entrepreneur otherwise unobtainable.”

To some extent, franchise corporations presently fill in the gaps left by higher education, though. Many, like McDonald’s, have their own boot camp for potential franchisees where folks learn the business and have mentors to guide them. What’s more, Rowan said major corporations frequently rely on the ranks of their employees to groom new franchisees.

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“There’s so many great stories about a franchisee who started where their first job was at, say, a McDonald’s, and they worked up to be a manager,” she said. “They focus on minorities and people who come from other countries. That person is learning the system on the job.”

That network, too, can be invaluable given that minorities and women frequently find themselves outside of the proverbial Old Boys Club, Gleiberman and Rast note. It’s one of the key reasons Brixton went this direction, too.

“I didn’t go to a fancy business school or get the chance to key into some big network, but my fellow franchisees around the country and even around my city are rooting for me to succeed,” she said. “I’m looking forward to being able to do that for other people, too, if I’m lucky enough to succeed.”

Originally published May 23, 2017.

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