January 3 2012

Good News: Minority Owned Businesses On the Rise

Julie Gunlock

An interesting new study was released last month by the International Franchise Association.  The study showed that minority and joint ownership (female/male) of franchise businesses increased from 2002 to 2007.  This is good news for entrepreneurs—particularly women and minorities who, despite the dismal economic outlook, appear to be thriving in this line of business.

The report shows a much higher prevalence of minority ownership among franchise businesses compared to non-franchised businesses. A little over 20 percent of franchises were owned by minorities, compared to 14.2 percent of non-franchised businesses.  And within the food and beverage industry, 21.5 percent of franchised businesses were owned by minorities in 2007. The report also breaks it down by gender, reporting that 20.5 percent of franchised businesses were female-owned; with an additional 24.4 percent of franchised businesses were jointly-owned (male/female).

This research creates some interesting implications when considering proposed regulations on some franchises—particularly fast food restaurants.

For instance, in Los Angeles County, the city council is considering banning the opening of certain fast food restaurants (in an effort to make everyone eat healthier, natch).  In San Francisco and New York City, regulators have banned happy meal toys.  Thanks to Obamacare’s passage in ‘10, all fast food restaurants are now required to post calorie information on their menus—a not inconsequential cost that eventually gets passed on to the consumer.  More regulations are on the way: soda taxes, ingredient limits and bans, and even more zoning regulations that would prevent the opening of these businesses.

The International Franchise Association’s report sheds some light on just who these regulations hurt: both the consumer and the minorities who own these businesses.

Does the Obama Administration really want to be known as a creating barriers for minority-owned business?  Probably not.  Other highlights from the report include:

  • 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.

Read the entire report here.

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