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Increased diversity, equity and inclusion (commonly referred to as DEI) has become a top-of-mind goal for businesses in virtually all industries in recent years. And across its various industry segments, franchising is seen by many as a powerful vehicle for increasing DEI in the business world.
According to U.S. Census Bureau reports, franchise businesses are more likely to be owned by minorities than non-franchised businesses. Per the data, over 30% of franchises are minority-owned, compared to 18.8% of non-franchised businesses. However, as Matthew Haller, president and CEO of the International Franchise Association told Black Enterprise in October, “If you look at the census data and compare us to non-franchise businesses, we have a good track record. But that doesn’t mean that everything is as it should be.”
Commonly, the most-often reported obstacles to becoming a franchise owner for minority groups is access to startup capital. In addition, a skills gap stemming from a lack of related educational opportunities is also commonly cited.
Another reason is social in nature. “The IFA found that entrepreneurs of color have smaller and less connected networks. Also, there is discrimination: unconscious bias that these entrepreneurs are facing,” says Abigail Pringle, who is the president of international and chief development officer at Wendy’s.
To address the obstacles, many in the franchising sphere are taking proactive measures to break down these barriers.
“I think it’s almost like vision statements and core values. Everyone has them, but for a lot of brands, they sat in the drawer and were never referenced; that is where diversity was,” says Robin Gagnon, who in addition to being the cofounder and CEO of We Sell Restaurants, also serves as Chair of the IFA’s Women’s Franchise Committee. “Now, we’ve taken everything out of the drawers and put it on the walls and are focusing on it as an industry.”
Adds the Chair of the IFA’s Diversity Institute Board, Earsa Jackson, When the research showed that “there is a delta between representation in the population and representation in franchising. We saw that as an opportunity. An opportunity for those diverse individuals to get into franchising. Also, an opportunity for our member companies to expand their base. It was a win-win, so we set out to strategically diversify franchising.”
Below is a look at three areas in which those in the franchising are being proactive in creating a more diverse industry.
Teaching the Basics of Franchising
Among the recently sprouted initiatives to improve the prospects for underrepresented groups in franchising is a six-week “boot-camp style” education program designed to teach the fundamentals of franchise ownership dubbed “Taco Bell Business School.”
The fast food brand is doing the program in partnership with the Yum Center for Global Franchise Excellence at the University of Louisville. The goal of the Taco Bell Business School is to assist groups that otherwise may not have the access or opportunities to enter franchise ownership. To that end, the program is free for attendees.
“This is a way to qualify and recruit and really change the look and feel and the complexion of our franchise base,” Taco Bell CEO Mark King said in the announcement of the program.
Further, in August 2022, sibling brand Pizza Hut followed suit with the corporate side and its franchisees launching the Pizza Hut Foundation, whose stated mission is to “empower our young leaders through scholarships for education, mentorship, and career readiness training to unlock opportunities for themselves and the communities where they live and work.”
Among the foundation's initiatives is providing scholarships to students in and around Pizza Hut restaurants that show leadership and are involvement within their community but are financially disadvantaged. The scholarships are available for students on track to apply to two- or four-year colleges or universities, vocational-technical schools, and trade schools.
Teaching Franchise Candidates How to Get Loans
As previously mentioned, financing is the most often cited hurdle when prospective franchisees from underrepresented groups cannot open a franchise like they desire. It was the case for Al and Shamairah Noufaro when the couple began offering franchises for their Junk Chuckers business. Their potential franchisees were getting turned down for loans at a significant rate.
After doing some research with their disheartened franchisees, the Noufaros found a way they could help rectify at least some of the issues: In approximately 70% of the cases there was a communication gap between the franchisee candidate and the bank.
Armed with that knowledge, the Noufaros created a four-hour role-play exercise they call “culture gap training.” The training is designed to help their prospective franchisees speak the language of business, and be prepared for some, at times, uncomfortable conversations.
For example, “With the women, [lenders] want to know what their role is: Are they managing operations? Is it field operations or back-end operations? That's where the bias comes in,” says Al. To forestall, the culture gap training teaches female Junk Chuckers franchise applicants to anticipate these kinds of questions and, perhaps more importantly, not lose composure in the moment. “We help them prepare to answer the clearly biased questions,” Al says.
It is an exercise they’ve seen pay off in increased loan approvals for their franchisees. According to Al, once a franchisee went through the training, they would typically get their loan approved within a week or two.
Also, in response to this issue, the IFA Foundation launched two online educational programs this past summer. The programs — one for franchisors and one for franchisees — are full of resources designed to address the communication gap.
“So many individuals coming from these backgrounds are going to be first-time business owners,” says Rikki Amos, executive director of the IFA Foundation. “They're blazing a trail for their family and their local community, and they go into the bank, and they don't know how to interview as successfully.”
Encouraging More Diverse Franchisors
While much of the focus has been on increasing the number of franchisees from minority groups, some effort is also going specifically towards encouraging more Black and people of color business owners to become franchisors.
For Black History Month 2022, FranchiseWire profiled five trailblazing Black franchise founders along with the brands they created. How do they view the future for franchisors of color?
Many are hopeful but, as most things are in business, it boils down to the money. “The fact is that there has never been a deficit of Black entrepreneurship and excellence,” said Chanay Walton, founder and CEO of A Better Weigh. “The challenges are systemic, which has resulted in a lack of access to capital and loans in underserved communities. By directly putting capital in the hands of Black business owners, we can then create effective and impactful solutions.”
But beyond money, Hakika Wise, founder of Kika Stretch Studios, is focusing on the knowledge base deficit. Believing more education on how to turn a business into a franchise is needed, Wise is developing her own “School of Franchising.” Run primarily via an Instagram page, she teaches lessons on franchising and offers 30-minute consultations. Wise says the goal of the endeavor is to “help inspire other Black-owned entrepreneurs to believe in their dreams and to keep pushing.”