5 minute read
Black Americans: Bridging the Racial Wealth Gap Through Franchising
by Seth Lederman, Consultant, The Franchise Consulting Company
America's history of racial inequality is strong and pervasive. From Jim Crow laws after Reconstruction to unequal GI Bill allocations to African Americans after World War II, there were multiple ways that Black Americans were prevented from accumulating wealth over the past 150 years. As a result, the wealth gap between Blacks and whites in the U.S. has not budged since the 1950s.
For instance, the Census Bureau revealed that disparity had manifested via homeownership. The percentage of Black families that owned a home at the end of 2020 was 44%, while 75% of white families owned a home within the same period.
But homeownership isn't the only area affected. Both income and savings are dramatically different between Blacks and whites. The Brookings Institute found that a white household's median net worth was ten times that of a Black household's. Furthermore, if Black Americans' share of the national wealth were proportional to their share of the population, Black household wealth would equal more than $12.5 trillion, rather than the just over $2.5 trillion that it is. This creates a wealth gap between the races of more than $10 trillion.
THE PROMISE OF FRANCHISING FOR BLACK AMERICANS
One way that Black Americans can level the playing field financially is through
franchise ownership. For years, franchising has offered Black entrepreneurs an opportunity to excel and bridge the wealth gap faster than opening a more traditional small business. Minorities own almost a third of franchise businesses.
Franchising has proven to be a great alternative to founding a business on their own for Black Americans. It doesn't require access to certain business connections or support. It provides a way around many other difficulties a person can encounter in getting a new business up and running.
The industries with the highest proportion of Black American entrepreneurs are travel, party-related goods and services, maintenance services, baked goods, and photographic products and services, according to the International Franchise Association (IFA) annual Economic Outlook Report.
That's not to say there isn't room for even more growth. For instance, only about 8% of owners are Black within the restaurant industry. To increase that number, the Multicultural Foodservice & Hospitality Alliance (MFHA) launched the Pathways to Black Franchise Ownership initiative in January 2021 to increase Black ownership.
OTHER WAYS BLACK AMERICANS CAN BUILD WEALTH
Too many Black Americans face a more difficult path to creating wealth than white Americans, thanks to lower wages and less inherited wealth. While addressing the systemic issues that created and continue to contribute to this issue is vital, there are some things that Black Americans can do.
First, conversations surrounding money and investments shouldn't be considered taboo. The more people of all races know about these topics, the more likely they will make better decisions and avoid pitfalls or mistakes. It is also essential that people begin to save, even if it is only a small amount at a time. Once a person has an emergency fund, they can keep saving and investing.
When it comes to investments, one to consider is buying a home. It is also essential to consider investing in retirement plans, such as 401ks, and the stock market in general.
GETTING STARTED WITH FRANCHISING
Even if Black Americans pursue all the above-mentioned ways to accumulate wealth, those interested in entrepreneurship might still want to consider opening their own franchise business. Organizations like the IFA have established a program—the MinorityFran program, which was later renamed to DiversityFran—to attract and support a range of minorities, including Blacks, Hispanics, Asians, and Native Americans, in buying into a franchise business.
Not all franchises are alike, and finding the right franchise for you can be a challenge. Franchise consultants help you evaluate and select the franchise opportunity that's an ideal fit for you based on your experience, goals, passion, lifestyle requirements, and budget.
— Russell Simmons
ABOUT THE AUTHOR
Seth Lederman, CFE, a Franchise Acquisition, and Development Specialist, is a multi-faceted entrepreneur with over 30 years of experience in small business success, including ownership and sale of his own business enterprises. He is a frequent contributing author to The Franchise Journal and is on the exclusive Forbes Business Council. Contact Seth at 312-307-1297 or at seth@ thefranchiseconsultingcompany.com.
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