The Demographics of Franchising

Observing the demographics of franchises unveils many interesting facts. In the past, a woman who worked was viewed as taboo. Today, things have changed. Not only are millions of women working, but millions are managing their own franchises. Over the last decade, the number of women who have become franchisees either solely or with a business or family partner has grown rapidly. It is estimated that there are 9.1 million women-owned businesses in the U.S., representing nearly 40 percent of all businesses. They employ 27.5 million people and generate more than $3.6 trillion in sales.� Women are starting new firms at twice the rate of all other businesses. The number of women buying franchises is estimated to be close to 38 per cent, which is the same percentage of women in the U.S who run their own small business. It has been reported that 60 per cent of women who solely run a franchise reported that they are highly profitable, compared with 43 per cent of men. These are phenomenal statistics!

What is it about franchises that women are so attracted to? Significantly, in some industries, it remains very difficult for women to reach high level positions. A franchise gives a woman greater working flexibility especially if she has children. Is she wishes to start a family, she is able to take a break whilst still earning money.� For many women, owning a franchise is the easiest way to achieve their dream of business ownership.

Ethnic minorities represent 29 percent of the U.S. population, yet only 6 to 9 percent of current franchisees.� From 1987 to 1992, minority-owned businesses in the U.S. increased 60 percent, totalling more than two million in 1992. An SBA study found that as of 1999, 22.5 percent of franchises offer minorities direct financial assistance, while another 50 percent offer indirect help. African-American entrepreneurship rates are increasing among African-Americans. The average rate was .29% in 1996 and .35% in 2004. Between 1997 and 2004, the number of African-American women-owned firms has increased by 32.5%. Two in five (39.1%) of all African-American owned businesses are owned by women.

Unfortunately, there are only a few Hispanic entrepreneurs who have started a franchise system and seen it grow substantially. Yet, quite significantly, let us observe some facts.� In 2000, Hispanic purchasing power was projected to be $276 billion. The United States has the fifth largest Hispanic population in the world, yet the purchasing power of Hispanics has not been felt in the field of Franchising. Hispanics comprise 11% of the American population, and by the year 2005, they will be the largest minority group in this country. By the year 2050, an estimated one in four Americans will be Hispanic. Knowing this, thousands of franchises are now targeting the minorities. Franchisors who are actively recruiting minorities are for example Burger King who promotes heavily in Hispanic media and has its own Hispanic Franchisee Association with 25 members. ServiceMaster Clean has 25 Hispanic owners and gives minority investors a 10 percent discount on their franchise fee.

These companies and many others have made a corporate commitment to recruit prospective franchisees from the Hispanic market over the past few years.

The hard fact is that all minorities comprise less than 3% of the $758 billion franchise industry. While some companies, including McDonald’s Corp. and Kentucky Fried Chicken Corp., have prospered through the pursuit of minority franchise owners, unfortunately a great number of companies have failed to recognize the value of diversifying their franchise ownership base. Fortunately, franchise industry leaders have recognized that the industry cannot sustain the rapid expansion of the past decade without taking steps to include all minorities. A major step in the right direction is the International Franchise Association’s (IFA) creation of Alliance for Minority Opportunities in Franchising, the primary goal of which is to increase the number of women and minority franchise owners.

It is safe to conclude that things are changing. Minority groups are being included and recognised as important.

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