« Hispanic Household Income | Ahorre | Hispanic Homeownership »
Franchising Business
Julie Bennett HISPANIC BUSINESS Magazine - Generating an estimated $1.5 trillion a year, accounting for almost 10 million jobs, and providing 10 percent or more of the economic output of 20 states, the franchising industry is proving a lucrative market for a growing number of the nation's 760,000 franchise owners. While owners of a single franchise – be it a UPS Store, a Fantastic Sam's Hair Salon, or a Quizno's Sandwich Shop – make a sustainable living, franchisees who can parlay one store into string of them are becoming millionaires.
Take Russ Umphenour, CEO of the RTM Restaurant Group in Atlanta, who started with a single Arby's franchise in the 1950s. Today Mr. Umphenour's company has 811 Arby's, 16 Sbarro pizza restaurants, and generates $754 million in annual sales. In fact, when the Restaurant Finance Monitor published its list this year of the Top 200 food-service franchisees, 58 multi-unit franchisee companies were each generating revenues of more than $90 million a year.
Several Hispanic market leaders are familiar names among franchising's brightest stars. Linda Alvarado, an owner of the Colorado Rockies baseball team and Alvarado Construction, also runs Palo Alto Inc., a multi-unit franchise company with 82 Taco Bells and 48 Pizza Huts.
Lopez Foods Inc., No. 11 on the 2004 Hispanic Business 500®, is lead 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 138 Burger Kings in Florida and Illinois. And Ralph Alvarez, who began his career as an executive at Burger King and Wendy's, is now president of McDonald's USA, responsible for over 13,000 restaurants across the country.
Still, while statistics are elusive because most of the country's 2,200 franchisors don't track their franchisees by race or ethnicity, experts say Hispanics and other minorities are participating in this thriving business sector in fewer numbers than might be expected.
C. Everett Wallace, chairman of the International Franchise Association's Minorities in Franchising Steering Committee, estimates 6 percent to 9 percent of the country's franchised businesses are owned by Hispanics, African Americans, Asian Americans, and Native Americans combined.
Industry experts differ on why the numbers are low. Some blame cultural bias; others see an uneven playing field. Some say the cost to open a franchise – anywhere from about $30,000 for a maid service, to millions of dollars to build and open a full-service restaurant – is prohibitive. And still others say franchisors need to do more to reach out.
"It's a marketing issue," says Mauricio Velasquez, CEO of the Diversity Training Group of Herndon, Virginia, a company that offers online courses about diversity to IFA members. "Franchise systems have done a poor job in reaching out to Hispanic markets. When franchisors complain that they can't find Hispanic candidates, I ask if they've attended conferences of the Hispanic Chamber of Commerce or the National Council of La Raza. They don't even know those organizations exist."
But increasingly, franchise companies interested in expanding into Hispanic neighborhoods and recruiting Hispanic franchisees and executives are launching aggressive outreach programs.
Nearly 600 franchisors now support the National Minority Franchising Initiative, a consortium dedicated to eliminating what it calls an "unacceptable gap" between minority populations and franchise ownership.
The consortium (www.minorityfranchising.com) lists minority franchising seminars, held frequently around the country, and provides lists of franchise "how to" publications, including the "Minority Franchise Guide."
The International Franchise Association's expos include minority franchising workshops, and its annual convention March 6-9 includes events geared to prospective franchisees and minorities. The association's Educational Foundation and the Association of Small Business Development Centers also have launched a Minority Technical Assistance Program to increase the number of minority franchisees.
Individually, franchisors also are reaching out. 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.
Meanwhile, the Franchise Partnership in Chicago seeks to connect aspiring minority entrepreneurs with franchisors and help finance the deals. Founded five years ago, the program enlisted 16 franchise companies including Carvel Ice Cream, Dunkin' Donuts, PostNet, Sign-a-Rama, and Fantastic Sam's hair salons.
It also signed on an impressive list of banks and other lenders and presented franchising seminars to more than 1,000 Hispanic and African American adults. So far, 10 African American and four Hispanic franchisees have formed as a result of the partnership's efforts.
Meanwhile, Hispanic executives in the franchising industry say opportunities exist for savvy individuals.
"Franchising provides a tremendous opportunity," says Javier Parraga, in charge of international franchising for five Cendant brands – Century 21, ERA, Coldwell Banker Residential, Coldwell Banker Commercial, and Sotheby's, responsible for 4,800 franchises with over 35,000 brokers in 64 countries. "Hispanics who know Spanish and want to work internationally can thrive here."
Julie Bennett writes the "Franchise Insight" column for the online Wall Street Journal.
October 12, 2004 06:36 AM | Law | Mortgages | Shop