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Why Hispanics Are Less Active In The Franchising Sector

Written by Ken Gaebler
Published: 11/5/2012

BlueMauMau identifies the key factor that restricts many Hispanic entrepreneurs from entering the franchise industry.

From culture to politics, Hispanics are gaining influence in the U.S. But when it comes to franchising, U.S. Hispanics are severely under-represented -- owning just a fraction of all franchised small businesses.

Hispanic Franchise Owner

In a recent report on Hispanic franchising, BlueMauMau cites a U.S. Census Bureau survey of businesses to quantify the gap in Hispanic franchise ownership. In 2007, Hispanics represented 16 percent of the total U.S. population. Yet Hispanic-owned companies represented 9 percent of U.S. small businesses and an even smaller 5.2 percent of U.S. franchised establishments.

So why the discrepancy? It's not because Hispanics aren't interested in franchising. In an article in The Street, Laurie Kulikowski cites Jose Torres, founder of Franchise4Hispanics.com (a web-based marketplace for Hispanic franchising): "The interest from the franchisee side has moved up significantly. (There is) much more interest, much more requests for information, much more calls from those who want to find about more about their franchise opportunities."

Additionally, many brand name franchisors have proactively attempted to recruit Hispanic franchisors, minimizing the effect a lack of awareness could have within the Hispanic business community.

Quoting Rob Bond, founder of the National Minority Franchising Initiative, Kulikowski points to a lack of capital as the primary factor behind the shortage of Hispanics in franchising.

"It's clearly money," says Bond. "Some of it may be a language barrier or lack of professional experience, but money is the key determinant The franchising communities would love to have more Hispanic franchisees if they're qualified and if they can foot the bill. That may be the disconnect. Someone has got to have some experience and some money to be attractive to a franchisor."

Although the challenge of getting money to start a business isn't unique to Hispanics, it seems clear that Hispanics face additional hurdles in funding a startup or franchise. As a result, it's important for prospective Hispanic franchise owners to thoroughly research all potential sources of funding including SBA loans, personal/family capital and programs designed to promote minority-based small business ownership.

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