Franchising: The Future of Latino Business

Story By: Kristian Jaime

 What started with a simple idea between Jorge Ferraez, publisher of Latino Leaders magazine and Enrique Ramirez, chief financial and strategy officer for Pizza Hut, soon became dynamic.

         It quickly developed into the Latino Franchise Symposium, and it entered its second year in August at the Pizza Hut Corporate Headquarters in Plano, Texas.

“A couple of years ago, we started thinking about just getting everyone together at a larger event to [teach] some of the experiences and lessons from franchisees and drive interest to those business opportunities,” explained Ferraez.

With other members of Yum Brands on hand to discuss the development of a franchise conference, a new business opportunity was born for one of the fastest growing markets in the United States.

Partnerships with influential organizations like the International Franchise Association (IFA) solidified it as the only business symposium of its kind and made it possible for domestic brands to establish an international presence.

“I’m very happy to say that we have participants from all over the country,” Ferraez continued. “This event includes 13 CEOs and 25 speakers talking to about 235 attendees about [franchising opportunities in the Latino market]. We started creating business relationships with business franchises seven years ago to tap into the Latino markets.”

Location, Location, Location

Governing principles behind a franchise run the gamut from market position to financing to perhaps the most rudimentary, real estate. The opening panel, entitled “The Real Estate Factor,” placed that issue front and center.

Among the panelists was Jose Legaspi, founder and CEO of the Legaspi Company; Fernando de Leon, founder and CEO of De Leon Capital; Gerardo Flores, vice president of real estate for Jersey Mike’s Subs; and Jake Pavelka, a real estate expert.

“Hispanic entrepreneurship is on the rise, and I think that’s because we are becoming more knowledgeable about access to capital and real estate partnerships. This symposium provides an awareness of the fundamentals needed to grow your business,” said De Leon.

Creating a storefront is as precise a task as any other tenet of business. Factors such as entry and exit points, traffic patterns and visibility all determine success. For De Leon, that means being able to pay for the best location, and access to start-up capital is fundamental to that task.

“Picking a franchise is going to entail an understanding of demographics, location and finance,” De Leon said. “That includes the competitive framework and how they position themselves in relation to their competition. The stronger a franchisee can understand those variables, the stronger they will be in the marketplace.”

Funding the Dream

If location dictates exposure, then funding determines everything else. During the panel “Access to Capital,” participants heard from experts in establishing good financial health. Everything from start-up capital to revolving lines of credit typically involves equal parts education and experience.

For Rosaline Aguirre-Fletcher, senior vice president and sales manager of the Small Business Administration (SBA) Lending Department for BBVA Compass Bank, the journey to establishing the next generation of Latino entrepreneurs is in the details.

“In the Latino community, we see a lack of knowledge in organizing their business and properly establishing it with the state and federal government and paying taxes. When we talk about good financial health, we talk about building up to get a loan,” Aguirre-Fletcher said.

With the average start-up amount between $20,000 and $45,000, demystifying the loan process is vital to first-time franchisees. Aguirre-Fletcher takes a comprehensive approach, often going as far as examining the business plan.

As she advises, a good idea without the planning is a recipe for a shortfall.

“What we like to do is sit with clients and see if they are financially healthy and work with them on the business plan, regardless if they are part of a franchise or not. We look at their market and their demographic to establish that plan,” said Aguirre-Fletcher.

Diversity in the Market

The reality is that Hispanics are still underrepresented in business in relation to the size of their demographic. Changing that requires a hard look at the new face of franchisees.

According to David Gibbs, president and CEO of Yum Brands, business savvy is just the beginning. International companies like his have already started transitioning to becoming one of the largest franchise firms in the world. For Gibbs, that is just the latest evolution in the market.

“If you don’t have good franchisees, the brand suffers and the business model will not come to life. For us, Yum Brands has 43,000 restaurants around the world, and 10,000 of them we own,” said Gibbs.

With the majority of their locations a franchise, a growing number of minorities are finding themselves at the helm of a Taco Bell, Pizza Hut or KFC site.

 “We are going to be a massive franchise company, and that is going to be our vision for the next phase of growth. Everything we do has to be focused on growing our business through franchisees,” Gibbs explained.

Through events like the Latino Franchise Symposium, the exposure for franchise opportunities is rooted in information and training. The process to become a franchisee for Yum Brands means learning the business first.

Global Ties

The increasingly interconnected nature of commerce has implications as profound in Latin America and Canada as they are domestically. Creating strong business ties to countries like Mexico demands partnerships.

Francisco De La Torre Galindo, Consul General of Mexico, knows all too well that franchises based in the United States have international potential. The same goes for a business started south of the border that wants to expand to the U.S.

“Symposiums like this are a good opportunity to enhance the competitiveness of North America as a region,” said Galindo. “We have some of the closest cooperation between the United States and Mexico in a long time. We have been able to create and foster economic mechanisms that help communities in Mexico, the U.S. and even in Canada.”

Recent statistics seem to corroborate the entrepreneurial spirit in the Latino community. While many start with an idea that becomes financially viable, many opt for a business framework already with a proven record.

For that reason, establishing a location for a well-known brand is all the more attractive. The benefit of having clear revenue streams and name recognition is often half the battle for a new business.

“This is a very important window for Mexican companies to be franchised in the United States,” Galindo continued. “While there is a disproportionate number of Hispanics as business owners [in relation to their overall population size], one in four small businesses in Texas are Hispanic entrepreneurs.”

Human Capital

As of July 2014, Hispanics comprised 17 percent of the total population in the United States. That equals 55 million people already working in various market sectors. Moreover, that represents an ethnic segment ripe for franchise business opportunities. Not only is that the largest minority block in the country, but it is also the youngest.

Lee Gonzalez, president of the Association of Latino Professionals For America (ALPFA) Dallas-Fort Worth Chapter, is one of those stemming the tide of an under-educated population.

“We all do our part at the local level by empowering students and mentoring them from the middle school level to their [first job],” said Gonzalez. “So professionals to mid managers, all the way to the executive suite, all have mentors. Our broader mission is to be represented at the highest levels like advisory and executive boards.”

With long-term goals to provide a ready workforce for the business jobs of the tomorrow, ALPFA believes the key is mentoring. At every level, the organization stands behind efforts to get Latinos into management-level positions.

Within the franchise business model discussed at Latino Franchise Symposium, first-time business owners made the connections necessary to start the process or improve on best business practices.

 “We are one of the youngest ethnic groups in the United States, so our strategic partnerships with those like Junior Achievement allow us to start working with students from elementary school on to professional success,” concluded Gonzalez.