Future of Franchise

Minorities the Future of Franchising? Statistics support explosive growth in the Latino market

Leave your office. Go downtown. Walk around in the suburbs. Do you see the changing face of America?

From top-level corporate positions, to Mom and Pop corner stores, the U.S. minority population is coming of age. Minorities are better educated and better compensated than ever before … and more entrepreneurial. They are also being called the “new frontier” of franchising.

Franchisors are realizing that minority entrepreneurs can successfully “turn the key” and start profitable operations in urban and suburban areas. These multi-cultural businessmen and women realize that, through franchising, they can empower themselves, their families, and their communities.  In particular, franchising has become an attractive option for Latinos with entrepreneurial aspirations.

According to Hispanic Business magazine, the sector offers a growing array of opportunities, and getting started has never been easier.  Latinos are now being viewed as one of the industry’s best hopes for long-term growth. As suburban locations are becoming franchise-saturated, many expansion-minded franchisors view Latinos and other minorities as a bridge to both urban neighborhoods and multi-ethnic consumers generally. As a result, franchisors are increasingly reaching out to minorities, offering financing assistance and other exciting incentives.

And their offers are being accepted.

Latino Marketing 101

“Latino” or “Hispanic”, as a description, refers to an origin or ethnicity, not a race. There is no one monolithic “Latino market.”  The U.S. Latino market is comprised of subcultures from over 20 countries in Central and South America, the Caribbean and Spain, with the majority (63%) of Mexican descent.

The U.S. Latino population is larger in size than the entire population of Canada and has grown by more than 60% in the past decade. It’s a growth spurt that has pulled Latinos into rough parity with African Americans as the nation’s largest minority group. The spending power of U.S. Latinos is slated to reach $2 trillion by 2020.

With that growth in numbers and income, young Latinos are graduating from college in much greater numbers. In fact, 14.3% of urban Latino adults, ages 18 to 34, have annual household incomes of $50,000 or more. It’s the highest percentage among surveyed ethnic groups, including Caucasian (12.7%), and African American (12.3%).

U.S. Latinos tend to “adopt and adapt” to customs and habits in the U.S. without shedding traditions and value systems. Along that line, marketers, and those trying to tap into the Latino segment, cannot simply transfer directly to the U.S. Latino market the conceptualizations or marketing strategies that work with more traditional, general market consumers. Latinos are assimilating to prevalent U.S. culture, but they are not, and probably never will be, fully assimilated. Instead, theirs is a path of acculturation. It is a process of integration of native and traditional immigrant cultural values with dominant cultural ones.

Language is one of the most obvious examples of this phenomenon. Spanish is likely to remain the language of preference among U.S. Latinos. Ninety-seven percent of U.S. Latinos speak Spanish and 51% of those speak it exclusively. Many younger and acculturated Latinos mix languages into a form of “Spanglish,” in which they speak English peppered with Spanish words. But when it comes to selling, 56% of Latino adults respond best to advertising when it is presented in Spanish.

One of the most pervasive and important values in the Latino community is family. Compared to the “What’s in it for me?” mentality of the general market, improving the family situation, and that of the community, tends to be considered first and foremost.  Franchising is a perfect fit.

The appeal of franchising to the Latino Market

With an improved understanding of the culture, it’s easy to see why franchising is appealing. To Latinos with entrepreneurial spirit, strengthening themselves financially means strengthening their families and boosting their community’s economy.

So franchising fits the cultural mold, but there’s more to it than that. Starting a non-franchise business from scratch is a long, arduous, uncertain road. Franchising, however, affords the entrepreneur a support structure from the parent company, industry knowledge, and a proven business concept. These benefits are not lost on the Latino community.

According to Lisa Hawkins, the International Franchising Association’s director for Emerging Markets and Diversity, “Franchises allow the small- and mid-sized entrepreneur to use a well-known name to start a business in their community and to strengthen them economically.”

This strength, which in essence provides a person with control of his or her future, is increasingly popular among Latinos. As a whole, U.S. Latinos understand that developing and owning businesses is how they will secure and define, rather than have dictated, their place in U.S. consumerism and wealth.

With a relatively low initial investment required, franchising makes sense as an avenue to accomplish that control. Latinos have strong franchise incentives plus available grants and loans that further make purchasing a franchise a very real possibility. And once they are operational, they speak the language, share the values and fully understand how to reach the Latino consumer – a growing market with $452 billion in current buying power.

Add it all together, and the Latino community doesn’t just fit franchising, it is the new frontier.