As the new Millennium nears, researchers are publishing myriad statistics showing how American life has changed in the past century. Two phenomenal changes in the business sector are franchising's dominance of American retailing, and the ascent of women entrepreneurs in American business.
Neither was a factor 100 years ago. Today, sales by franchised outlets represent 40 percent of domestic retail sales. Women own more than one-third of all businesses, and are starting new businesses at twice the rate of men. The Women's Consumer Network predicts that, by 2000, women will own 80 percent of all new businesses and control almost 50 percent of American companies. These statistics belie two extraordinary, though quiet, revolutions of our time.
One would expect these two phenomena to converge, that the growth of women entrepreneurs and franchising would result in more women-owned franchise businesses.
Not so. Women are largely absent from the ranks of franchise owners. According to Women In Franchising Inc.'s most recent statistics, the percentage of franchises in 1995 owned by women, or jointly by a man and woman, fell to 8.5 percent and 15.5 percent, respectively, from 11.1 percent and 23.9 percent in 1990. The organization claims the trend is continuing.
No one can completely explain what is discouraging women from selecting the franchise option. Both women franchisors and franchisees claim it's a perception problem: Franchising is considered a "good ol' boy" network, inhospitable to creative types and with capital less accessible to women franchisees. All emanate from basic misconceptions about franchising.
Franchising is a business expansion method governed and created by a contract. A franchisor (the concept owner or supplier) allows a franchisee to sell or distribute specified goods or services associated with the franchisor's trademarks, under specific conditions, in exchange for franchise fees or royalties. Franchising enables a company to expand its market presence without having to invest its own capital or personnel. Far from just selling hamburgers, successful franchises occupy all niches, from kiddie gyms to tax preparation centers, from gourmet cookies to funeral services.
No sound reason can explain why women perceive a barrier to franchise ownership. There is nothing peculiar about franchising that makes it less suitable for women or women less suited for it. Misperceptions are best overcome by educating women about every aspect of franchise ownership, warts and all, from skill requirements and marketing support, to franchisee statistics (not just financial, but franchisee turnover rates) and the franchisees' role in network decisions.
This is not to say that buying a franchise is the same as starting a business from scratch. Unlike an independent business, a franchisee basically leases the franchisor's trademarks for a specified term. Like a lease, when the franchise term expires, the franchisee must relinquish these rights and de-identify from the chain.
At the same time, franchising offers important advantages over independent business ownership. Successful franchise systems provide a defined and proven business format and instant identification with a recognized brand, an increasingly vital asset in a brand-conscious world. As cooperative enterprises, they combine the buying power of all system participants, effectively leveraging financial resources.
Most systems provide centralized advertising, giving individual franchisees access to media and creative talent not otherwise affordable. Many systems provide group buying programs and computerization, yielding significant cost savings and efficiencies.
Franchisees often have greater access to capital - some franchisors offer direct financing or facilitate SBA loans. Even in systems that don't, lenders will often look at existing franchisees' financial performance, eliminating the new borrower's biggest hurdle, no track record.
Because operating uniformity is critical to consumer brand awareness, successful franchises offer training programs to franchisees and their staff. Franchising also provides immediate networking benefits, which many franchisors facilitate through private intranet systems.
Realizing that women's misperceptions might be costing them a vast talent pool, franchisors are fighting back. Several years ago, the largest franchise trade association, the International Franchise Association, launched a Women's Franchise Network to educate women about franchising and provide professional mentoring, networking and skill development programs. Some chains have affirmative action programs to recruit qualified women prospects.
While franchisors may be late in noticing the disturbing decline of women franchisees (most franchisors' top executives are male), they should know that women are too influential to be overlooked as prime franchise candidates. Ultimately, however, misperceptions about franchising cost women entrepreneurs sound investment opportunities.
Making an intelligent investment decision requires intense research and a systematic plan. Numerous resources offer insight into franchising, from local franchise and business opportunity shows to a slew of useful Web sites and publications, and from women's organizations such as Chicago-based Women In Franchising Inc.
Selecting the right franchise is not about predicting the next consumer rage, but finding a business that suits the female entrepreneur's interests, talents and budget. Business consultants and attorneys specializing in franchising can help assess an opportunity's potential and explain contractual duties. Leaving no stone unturned, no smart woman contemplating business ownership should overlook the franchise option.
Rochelle B. Spandorf is a partner with Foley & Lardner in Los Angeles, where she specializes in franchise law. She served as the first woman Chair of the American Bar Association's Forum on Franchising and is a past Chair of the California State Bar's Franchise Law Committee.
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