Minority owned franchises, the unsold market

"U.S. Census data indicates that minorities will account for nearly 90 percent of the nation's total population growth between 1995 and 2050. Already, the share of businesses owned by ethnic minorities increased nearly 22 percent from 1997 to 2002..." [Entrepreneur.com]

For me these trends and this article is about one thing -- lost money. I'm not a franchisee with a social conscious. Let me be open about this. I'm a hedonistic mercenary -- you know, the pigs-at-the-trough kind who is out for one thing, but getting it honestly. Here's my logic. When my franchise system expands so does the brand recognition, which includes my own backyard. That translates into customers. I also figure if my franchisor is collecting a lot of royalties elsewhere because of so many new franchisees, eventually there will be economies-of-scale for me. Less royalties to pay. That's why I'm so amazed that franchisors, master franchises, area developers and even franchisees have not engaged on all cylinders in tapping into the explosive minority market.

What is the franchise industry doing to encourage diver$ity? On a macro scale, the IFA and other groups are trying to encourage the push into this area. The problem lies with the franchise networks. They are having a hard time relationing with minorities. Although most systems see minorities buying their franchise, they are lulled into thinking their diversity "efforts" are fine. The progressive networks are just chipping the top inch of the diversity iceberg and the rest are waiting for drink the melted water. Craig Hsueh wrote a blog earlier about his experience with franchise sales teams at a Franchise Show. Their sales development teams were geared largely to sell to one group, speaking mainly with Caucasians in a show dominated by minorities.

The opportunities with minorities for franchisors are vast. The question is why aren't franchise boards and franchise advisory councils pushing networks aggressively to take advantage of the growing demographics of minorities? Some of the areas they should be working on is described well by minority franchise expert C. Everet Wallace, co-founder of the IFA's National Minority Franchising Initiative.

"The biggest obstacles [to minorities] can be summed up in three very simple parts. I call them the "gaps." One is the information gap. The minority community is not as well-informed about franchising and its opportunities. The second one is a relationship gap--because [minorities] are less informed and less involved [in franchising], they have fewer [franchise] relationships...The third one, frankly, is a capital gap."

The capital gap is not as prevalent among some immigrants as might be supposed. The problem is that we have a process and system of gathering capital that can be a different process for some immigrants. Our systems in this country aren't geared to recognize their networks of capital. As we understand their worlds better, we will be able to accomodate those unseen capital reserves to use in franchising. That is one of many things to come that the industry will need to discover.

Those who have begun to tap into this market are booming. You doubt? Then think 7-Eleven or Subway's (Rated eighth and first in 2005, respectively. See Entrepreneur's Annual Franchise 500 list). Or watch Panda Express.