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Franchises a Draw for Minority Entrepreneurs
The International Franchise Association recently released new research on minority-owned, female-owned and joint female/male-owned franchise businesses. The report, Franchised Business Ownership, 2007: Minority and Gender Groups, prepared by the IFA Educational Foundation (IFAEF) and based on the U.S. Census Bureau's 2007 Survey of Business Owners, shows minority and joint ownership (female/male) of franchise businesses increased from 2002 to 2007, while female ownership declined.
"Franchising offers opportunities for all Americans to go into business for themselves, but not by themselves," said IFA President & CEO Steve Caldeira. "Despite a continued challenging economic environment, franchising continues to offer opportunities for women and minorities to become small business owners, particularly when benchmarked against other industries."
The report shows a much higher prevalence of minority ownership among franchise businesses compared to non-franchised businesses; 20.5 percent of franchises were owned by minorities, compared to 14.2 percent of non-franchised businesses. Within specific minority and ethnic groups, Asians owned 10.4 percent of all franchises compared to 4.9 percent of non-franchises, Blacks owned 4.9 percent of all franchises compared to 3.6 percent of non-franchised businesses and Hispanics owned 5.2 percent of franchised businesses compared to 5.4 percent of non-franchised businesses.
The report provides a special look at the food and beverage industry due to the large concentration of franchise businesses in this sector. Within this sector, 21.5 percent of franchised businesses were owned by minorities in 2007. By sub-sectors, in special food services (such as catering and contracting), 36.9 percent of franchises were owned by minorities. In the quick services restaurant sector, 21.2 percent of franchises were owned by minorities. In the full service restaurant sector, 19.0 percent of franchises were owned by minorities.
By gender, 20.5 percent of franchised businesses were female-owned, compared to 25.7 percent of non-franchised businesses. However, 24.4 percent of franchised businesses were jointly-owned (male/female) compared to 18.2 percent of non-franchised businesses.
Some additional highlights of the report are below:
Minority ownership of franchise businesses increased by 1.2 percentage points, from 19.3 percent in 2002 to 20.5 percent in 2007, an increase of 6.2 percent.
In 2007, there was a higher minority ownership rate among franchised businesses than non-franchised businesses - 20.5 percent of franchises were owned by minorities, compared to 14.2 percent of non-franchised businesses.
Female ownership of franchise businesses declined by 4.5 percentage points from 25.0 percent in 2002 to 20.5 percent in 2007 (a decrease of 18 percent) while joint ownership (male/female) increased by 7.3 percentage points from 17.1 percent to 24.4 percent (an increase of 42.7 percent).
Overall, a greater percent of minority-owned businesses were operated as franchises in 2007 (3.0 percent) than in 2002 (2.7 percent).
In the food and beverage category, 21.5 percent of franchise businesses were owned by minorities in 2007 compared to 20.2 percent in 2002.
In the food and beverage category, 12.5 percent of franchise businesses were owned by females in 2007 compared to 13.2 percent in 2002. Joint ownership (male/female) of franchise businesses was 25.7 percent compared to 20.3 percent in 2002.
The ownership rate was greater among nonwhites in franchised businesses (14.9 percent) than nonfranchised businesses (7.9 percent), regardless of the size of business, based on annual receipts and number of employees. When comparing franchises to nonfranchises, there was little difference in ownership rates among Hispanics and females based on size of business.
The research project began in 2005 under the leadership of former IFAEF Chairman Mike Roman, CFE, and has continued with the support of the ExxonMobil Corporation.