Diversity in Franchising March/April 2023 Previous Issues Sponsored Content

Promoted Story: Franchising for the Black Community

by Chancie Romain, Senior National Franchise Manager & Black Entrepreneur Specialist, CIBC

Franchising is on the rise in Canada, with a notable increase in quick service restaurants (QSRs). According to the Canadian Franchise Association’s (CFA) Franchise Forecast 2022, the Canadian franchise industry generated more than $120 billion in 2022, and is currently the economy’s 12th largest contributor to the national GDP. In addition, franchised businesses were projected to employ 1.85 million people in 2022.

However, while visible minorities patronize these brands, they are notably underrepresented when it comes to franchise ownership. A recent Statistics Canada (StatsCan) breakdown of ownership demographics revealed that only 12 per cent of small and medium enterprises (SMEs) are owned by members of visible minorities.

Franchising is replicating a successful business model while expanding the presence and reaching people with an entrepreneurial spirit. This business model could also provide a chance to broaden the entrepreneurial footprint within the Black community. Over the past few years, there has been a considerable investment in the community’s ability to obtain financing for Black-owned businesses, as companies work to remove the structural barriers that pre-vent entrepreneurial spirit from thriving. We can also explore how this impacts the ESG (environmental, social, and governance) factors of the franchisors’ and customers’ decision-making.

A source of expertise and lasting partnerships

StatsCan presents data on how the Black community is underrepresented within the SME food and beverage space. Visible minorities make up 12 per cent of franchise ownership in Canada, according to the 2020 SME profile report on ownership demographics. Of that 12 per cent, only 16 per cent are in the lodging and food services sector, including the QSR industry. This data suggests an opportunity for franchisors to seek out entrepreneurs, including Black entrepreneurs, to strengthen their relationships and presence within this community. Engaging with local leaders and partners who have expertise of local markets can help determine potential franchisees and franchise locations. Local leaders and partners can provide a listing of people, knowledge, research, and data of the markets explored.

The reach of franchisors and ESG

As customers are increasingly focused on ESG principles, including diversity and inclusion, franchisors need to promote and expand their diversity and inclusion initiatives to reach these communities.

With ESGs in focus, customers are researching franchisors’ impact and intention, which can affect their decision-making regarding the product or service.

Creating a list of community-specific benefits for existing or new franchisees can increase a franchisor’s impact on the Black community. As customers have demonstrated, there is a higher awareness of the current ESG challenges and inclusivity when considering the choice to buy a good or service. Exploring diversity in marketing materials may have a favourable effect on how both customers and potential franchisees think about the franchise.

The opportunity to expand a franchise’s reach within new communities and demographics and have a presence within new localized markets, while providing access to a franchise network rather than starting a business
from the ground up, benefits both the franchisor and incoming franchisees. It also creates the opportunity to increase market share and develop new opportunities for potential business owners, which is an added benefit of joining the franchise network. In addition, diversity of thought can give the franchisee more opportunities and support for decision-making, product development, and marketing, resulting in a social impact and increased brand awareness.

Increased financing options

For many new and current franchisees, access to financing for acquisitions is a common concern. Within the Black community, access to financing has proven to be an even more difficult process that can discourage many prospective entrepreneurs from seeking capital to realize a dream.

CIBC offers two financing programs, the Black Entrepreneur Program Loan and the Canada Small Business Financing Program, that can be used to start the journey of franchisee ownership and help turn ambitions into reality.

With improved access to funding for equipment and leasehold improvements, the CIBC Black Entrepreneur Program Loan is a crucial step in assuring that Black business owners and entrepreneurs receive the financial support they need to start up, scale up, and thrive. This program can provide up to $250,000 in financing for Black entrepreneurs with an ownership of 51 per cent, including access to owner and employee banking benefits to assist in driving success.

The second financing option available to all potential franchisees is the Canada Small Business Financing Program, which can assist in financing for small business startups and existing business owners.

For further information, contact a CIBC Business Advisor & Black Entrepreneur Specialist to assist you in reviewing your options. This can be done by visiting your local branch or online at CIBC.com/Business.