What the Current Economic Climate Means for Diversity Programs

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The blueprint and successful diversity program models already exist in the franchise industry.

By Reginald Heard

    By general definition and face value the term “diversity programs” results in a wide range of individual perceptions, individual biases and interpretations albeit both favorably and unfavorably on the validity of these programs and their overall economic contributions. Organizations and those individuals in leadership positions with limited exposure to the inner workings of established diversity programs may be completely misinformed and unaware of how such programs can be a resource tool to grow their businesses. Having a limited understanding and exposure can often limit an individual’s ability to identify with such programs as simply a civil rights initiative tailored to enhance the inclusion of under-represented minority groups or some sort of mandated policy targeted to meet diversity quota goals. The greatest misconception with this injudicious reality is the belief that those individuals who are selected and highly recommended to participate in these diversity programs are somehow commonly less qualified than their peers and would otherwise not qualify without such a program.  They are perceived to be less core essential and equal contributors.  On the contrary, there exist many other individuals and organizations that have demonstrated a commitment to the inclusion of a successful diversity program that recognizes such initiatives as another resource tool to maintain a competitive advantage in the market and as an eminent component to their overall growth strategies. Such programs are also recognized as an investment to expand their company’s intellectual human capital, their customer base and enter into new market opportunities. The business case is clearly made here that a well-managed diversity program that is both employee-internal and customer-and-market external focused will result in the greatest return on investment on its overall employee morale and retention, broaden the customer base and enhance an organization’s overall revenues and bottom-line profitability.

The Untapped and Underserved Population Base

Women, minorities and the lesbian, gay, bisexual and transgender communities are some of the largest and fastest growing sectors in our economy and continue to gain tremendous strength in their purchasing power.  These communities continue to make rapid progress in the transition to new and expanded business ownership. The minority population will grow rapidly in the 21st century and will continue that growth in their purchasing powers. According to a U.S. Small Business Administration’s February 2005 report, Dynamics of Minority-Owned Employer Establishments, between the periods of 1999-2001, minorities owned 15.1 percent of all U.S. businesses or more than 3 million firms, with 99 percent of these firms being small businesses that accounted for more than $590 billion in revenues. Many minorities may be the first generation to become business owners and many others come from family backgrounds with an extensive history of business ownership, higher education and broad professional experiences. For many of these individuals, business ownership continues to be a desirable gateway to achieving the ultimate goal of financial independence, fulfilling personal self-actualization and building generational wealth for their children and families.

Economic Climate Ripe for Growth and Expansion

Given the aftermath of this past great recession, the U.S. economy continues to experience consistently modest GDP growth, improved employment trends, a historically low interest rate environment, tamed inflationary pressures, and a recapitalized and healthy banking system.  Many individuals who were directly affected by the recession, which resulted in the loss of full-time career positions, have been working over the past couple of years by re-engineering themselves for re-entry back into the labor markets for both full-time and a combination of part-time jobs. However, a significant portion of the population in this group dropped out of the labor market no longer seeking new employment options. As a result, the economy over the past couple of years has experienced an uptick in the number of self-employed independent contractors, and a strong interest in self-employment by means of starting a new independent or franchise business, and the purchase of existing businesses.  The baby boomer population is also giving serious consideration to deferring retirement and becoming active in starting new franchise businesses to supplement their income sources.

Targeted Diversity Programs are Custom Tailored for Franchise Systems

There are more than 770,000 establishments, according to International Franchise Association’s 2014 Franchise Business Economic Outlook, and 5,700 “FRUNS” based on the FRANdata Unique Numbering System that identifies every brand in the United States that is associated with franchising.  The franchise industry is best positioned to provide the greatest range of business opportunities for new and existing entrepreneurs based on investment size levels, desired industries, geographic market preferences and managed barriers to business entry risk. Tremendous opportunities exist for established franchise systems to develop effective diversity programs and to expand their system’s base and to accelerate their brands into new markets. The blueprint and successful diversity program models already exist in the franchise industry and do not necessarily require a ground-zero development plan to implement a program custom tailored to complement your franchise system’s target development growth strategies. An excellent sample of a franchise model company with a successful and long running diversity program is Choice Hotels International. Choice Hotels International is one of the world’s largest hotel companies with more than 6,700 branded hotels under the flagged names such as Comfort Inn and Suites, Quality Inn, Sleep Inn, Clarion, Cambria Suites, Mainstay Suites, Suburban, Econolodge, Roadway Inn, and the Ascend Hotel Collection. Choice Hotels initiated a Minority Incentive Program with a commitment to achieve greater diversity in the lodging industry and to provide support to increase the number of under-represented minority hotel owners into its system. Choice’s Minority Incentive Program has a dedicated team that is focused and that have incentives to promote African-American, Hispanic and Native American hotel ownership in the brands, and is tailored to provide both the technical support and financial assistance. A diversity program can be developed by a franchise system to achieve many objectives and can be structured with a variety of promoted incentive options.  The primary goal of the franchise system may be to grow its franchise base and to expand the brand concept into new markets that otherwise would not have been accomplished through traditional development channels.  The program can be designed to provide fully disclosed financial incentives such as reduced, deferred, partially financed or waived franchise fees, reduced royalty fees, marketing budget allowances and franchisor master lease arrangements, to name a few. Whether your franchise system has or does not currently have a diversity program, it is essential that your organization identify with these programs as an executable business strategy to grow the brand and to maintain a competitive market advantage. As one of the common industry sayings, “Franchising is being in business for yourself, but not by yourself,” this also holds true for franchise systems in seeking available resources for guidance in developing a successful diversity program. IFA, in addition to having a working knowledge about how other franchise systems have operated successful Diversity Programs, also has dedicated staff resources that have built strong strategic alliances with external organizations, community development organizations, city mayors and non-profit municipalities all committed and vested in the continuous redevelopment in their communities and the expansion of small-business ownership. Reginald Heard is president of Bankers One Capital and serves on the International Franchise Association Educational Foundation’s Diversity Institute Board. Find him at fransocial.franchise.org.  

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