Searching for the Best Franchises for Minorities
Trying to determine which franchise opportunities are the best for minorities seems straightforward enough. However, when you actually dig in and attempt to pinpoint the definitive source material that will lead to an answer, things get a bit slippery.
Many franchises incentivize minorities to join their systems. As president of the World Franchising Network Rob Bond puts it, these franchises "grease the skids" on behalf of minority candidates because they see value in promoting diversity among their franchisees. On account of a still-languid economy, however, many franchisors' approach has changed significantly in recent years. As Bond explains, “African Americans and Hispanics were being aggressively recruited five years ago to fill vacancies.” But today most franchisors are more concerned with trying to grease the skids for foreign investors with significant piles of investment capital.
In November of 2010, Bond published an ambitious study cataloging the 50 most minority-friendly franchises. The study was based on a questionnaire in which franchisors were asked about overall minority representation in their system, minority managerial representation, and minority incentive programs. Bond’s study provides an extremely valuable data set and is one of the most comprehensive studies of which franchises are best for minorities.
To most effectively interpret Bond's minorities in franchising report, it's important to understand the methodology used by the questionnaire. First, it should be noted that the very definition of a minority can be problematic and subject to interpretation. In the World Franchising survey, that ambiguity is addressed by defining minorities as Hispanics, African Americans, Asian American and Native Americans. (Women are not considered minorities for the purposes of the report.) Also, while there is an “other” (fill-in-the-blank) option, it's important to note that a franchisor responding to the survey might not think to add persons with disabilities to the mix (as their inclusion as a "minority" is open to debate). Nonetheless, this report is a great resource for anyone looking to understand the state of minorities in franchising today.
Another resource for those exploring minorities in franchising is a recent IFA / PricewaterhouseCoopers study. Although it lacks the specificity of the World Franchising report’s minority-friendly franchise listing, the PricewaterhouseCoopers report commissioned by the IFA Educational Foundation’s Diversity Institute provides a comprehensive analysis of (1) The percentage of franchised businesses that are owned by each minority and gender group and (2) the percent of businesses owned by each minority and gender group that are franchised using US Census Bureau Data. This study reveals that 19.3% of franchises were owned by minorities, compared to 13.2% of non-franchised businesses.
Of course, it's once again important to understand the methodology used in assembling this report. According to Miriam Brewer, who runs the International Franchise Association’s Educational Foundation’s Diversity Institute, “The IFA adopted the U.S. Census Bureau’s categories to define minorities (racial and ethnic) for the Minority Franchise program.” The Census Bureau defines minorities as Blacks, Hispanics, American Indians/Alaska Natives and Asians and Pacific Islanders. Although many of the Minority Franchise program members are women, the data for this study does not represent them. “We hope to expand in the future to be as inclusive as possible in terms of true diversity,” Brewer explains.
At the end of the day, for those hoping to understand which franchises are best for minorities, there are a number of resources available. The World Franchising study provides a useful and highly specific list of minority- friendly concepts, but excludes some potential minority categories. The IFA / PricewaterhouseCoopers study, meanwhile, mines U.S. Census data to provide great aggregate statistics on the state of minority ownership in franchised vs. non-franchised businesses. However, the report doesn't call out the top franchises for minorities by name.
Researchers and prospective franchisees would be well-served by consulting both reports (and any other available sources) to get as full a picture as possible of the best franchise opportunities for minorities today.
As a journalist, Susanna Speier has published over 100 articles for print and online publications. She holds a BA from Hampshire College, an MFA from Brooklyn College, C.U.N.Y. and a post graduate screenwriting certificate from Boston University. You can follow Susanna on Twitter @SusannaSpeier or visit her at her website http://www.susannaspeier.com.
If you have aspirations of business ownership, explore FranchiseHelp.com’s directory of franchise opportunities.
Why I Have an Issue with the Forbes Franchise Rankings
The 5-Year Growth Rate and 5-Year Franchise Continuity are both great independent metrics of how a franchise is doing on average. As a potential franchisee both of these statistics are vital for selecting a franchise - you want to select a franchise that will provide you with a high return on investment and which will survive in the long run. I think these are, as FRANdata and Forbes suggested, two of the biggest (if not the two biggest) and most obvious metrics for whether or not a franchise is a “good” opportunity for a franchisee. But how do you use these to determine which franchise is BEST? This is the fundamental difficulty in coming up with a ranking system - it isn’t the difficulty in separating the good from the meh from the bad - it’s separating the great from the good and the best from the great. In the case of these rankings I found it to be pretty difficult to comprehend how they differentiated between the top ranked franchises. For instance, if you look at the difference between Discover Map (Forbes #4), Just Between Friends (Forbes #5), & Seniors Helping Seniors (Forbes #6) they all have extremely close continuity ratings and substantially different growth rates. In fact, in the case of these three, the overall rankings are opposite the growth rate rankings. Seniors Helping Seniors is ranked at the bottom of these three franchises despite having a growth rate that is 31 percentage points higher than Discovery Map and a continuity that is only 2 percentage points lower. This suggested to me that continuity was viewed as the dominant factor. But that logic didn’t hold for the rest on the “Economy Class” Top 10, as BrightStar Care (Forbes #7) had the same growth rate as Pop-a-Lock (Forbes #8) but a continuity rate that was 12 percentage points lower. These comparisons show that these were not the only two factors that went into the rankings, which is understandable, but no other factors that are explicitly listed in their results seem to be major factors.
Franchise Disclosure Document for Dummies – Part 6
The key disclosure in Item 15 states whether the franchise owner is obligated to participate in the direct operations of the franchised business. For prospective franchisees looking for a pure investment rather than a business opportunity, this disclosure might be the first (and only) provision they read in the FDD. Although, an experienced franchise investor may be able to negotiate an exception with the franchisor.
Advanced Franchise Accounting Terminology
Fair warning: If learning about things like GAAP, revenue recognition policies, and the intricacies of cost vs. expenses makes your eyelids droop, feel free to skip over to the next article.