Two wealthy Latino leaders who have worked their way up from the bottom are launching a program in Los Angeles to help other Latinos start their own franchises.
David Lizarraga, president and chief executive of The East Los Angeles Community Union (Telacu), and Rudy Mulder, CEO of Chicago's Urban Investment Trust, will officially unveil their plan in Los Angeles on July 24.
Using funds from a jointly owned development company, the two men are forming a new nonprofit organization called Latino Initiatives for the Next Century, which will help finance the costly franchise fees ($25,000 to $100,000) that lock many minority businesspeople out of this specialized world of entrepreneurship.
LINC will also help people fill out the complex financial statements needed to buy a franchise business, as well as set up scholarships and job-training programs to help Latinos improve their job skills and be more competitive in the workplace.
LINC's launch is being backed by more than $5 million placed in its nonprofit fund by Millennium Three, a real estate development company co-owned by Mulder and Lizarraga. Millennium Three builds and manages shopping centers, apartment buildings, industrial facilities and schools mostly in inner-city areas. Recently it purchased the Gateway Plaza in Compton, a 160,000-square-foot shopping center, and refurbished it.
LINC will facilitate financing to aspiring franchisees in three ways, Mulder said. First, it will help arrange market-rate loans through Bank of America and LaSalle National Bank. (LINC is also partnering with Arthur Andersen to provide franchisees with advisory services.)
Second, it will assist franchisees to apply for government funding, such as loans made available through the U.S. Small Business Administration. And third, LINC itself will directly provide market-rate loans to franchisees. On those direct loans, in addition to market-rate interest payments and principal repayment, franchisee/borrowers will be required to pay LINC anywhere from 2 percent to 5 percent of their net profits.
By making financing more readily available, Mulder and Lizarraga hope to increase Latino business ownership nationwide.
"Latinos represent only 2 percent of business ownership in this country," said Mulder, whose mother is Mexican and father is European American. "What we saw was that the tools needed to start businesses were not there in the community. So we started to look at how we could provide that and build wealth and economic empowerment."
A strong route to success
LINC is being launched in four states California, Illinois, New York and Texas where 78 percent of the nation's total Latino population resides.
Mulder and Lizarraga thought franchises seemed an excellent route to success. A study shows that 80 percent of franchise owners are successful, compared to 20 percent of those who own independent mom-and-pop stores, they said.
"Latinos are the fastest-growing small-business segment in the United States," said Lizarraga, who has worked with Telacu, a nonprofit community development corporation, since 1972. "We wanted to expand the pie and make the America dream available for everyone."
Already, Dallas-based 7-Eleven Inc. has agreed to work with LINC, and at least a half dozen fast-food and auto-parts franchisors are being approached. Latino entrepreneurs interested in being franchisees of these organizations will be able to use LINC services and loans. Mulder's Urban Investment Trust has worked with 7-Eleven for the past five years, developing several 7-Eleven properties in the Midwest.
Working together on inner-city projects, the Latino businessmen, both born in Mexico and both the sons of preachers, saw the need for more Latino entrepreneurs to tap into the nearly $500 billion in Latino purchasing power in this country.
"What is making this tick is our desire to impact people and create job opportunities in areas where there haven't been any," Lizarraga said.
Scouting for 7-Eleven
LINC is getting ready to help its first Latino entrepreneur open a 7-Eleven franchise in Chicago next month, and it has three more deals in the pipeline there. The organization is scouting locations in Southern California for 7-Eleven projects, ranging from Los Angeles to the Mexican border, and it is working with local advisory groups, such as the Latin Business Association and local members of the U.S. Hispanic Chamber of Commerce, to identify interested and qualified businesspeople. The convenience-store company has agreed to pay LINC $5,000 for every successful referral it receives.
LINC hopes to open 150 7-Eleven franchises across the country in the next three years. One third of those are projected to be in California.
7-Eleven officials said LINC's goal to bring more Latinos into the franchise world mixes well with its goal of creating a diverse ethnic mix of franchise owners to operate its 5,700 stores in the U.S and Canada.
"We thought this would be a terrific experiment," said Jack Wilkie, national franchising director for 7-Eleven.
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