Myth of the Missing Minority Franchisee

 I was recently contacted by a reporter who asked me if franchisors really were making progress selling franchises to minorities. So I took a look at the U.S. Census’ data on the question. Much to my surprise, the data shows that the question of whether franchisors are making progress selling franchises to minorities is the wrong question. Minorities are actually disproportionately likely to own franchised outlets.

To show you what I mean, I have produced two charts from the data in the Census Bureau’s Survey of Business Owners – our government’s census of all businesses in existence in the United States at a point in time. The first chart shows the proportion of businesses owned by people of different races that are franchises. As the figure shows, all minority groups are higher than Whites in the portion of the businesses that they own that are franchises.

 The second chart compares each race’s share of franchisees and share of total businesses. It shows that all three minority groups have a higher share of franchised businesses than their share of total businesses, while the opposite is true for Whites.

So what’s the message here?

The idea that minorities are somehow underrepresented among franchisees is a myth. The problem might be that minorities are underrepresented in starting businesses overall – a topic that I address in Illusions of Entrepreneurship – but that’s an entirely different question that has nothing to do with franchising.

Source for Figures: Scott Shane from data contained in the Survey of Business Owners, U.S. Census

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Scott Shane is the author of Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By and From Ice Cream to the Internet: Using Franchising to Drive the Growth and Profits of Your Company and an occasional guest blogger on this site.