FRANCHISING:
A New Tool for Economic
Development
By C. Everett Wallace, Co-Founder
National Minority Franchise Initiative
CDCs
and franchises can be mutually beneficial and play an integral
role in revitalizing underdeveloped communities
A
significant number of cities and towns are making a concerted
effort to revitalize the commercial districts that once
were the center of retail activities in their residential
neighborhoods. In fact, the most popular design techniques
being employed by today’s most progressive architects
and land planners are based on the “lifestyle friendly”
concept that has been coined “new urbanism.”
At the core of this design approach is the notion that residential
land uses should, to the greatest extent possible, provide
the community with the ability to live, shop, and recreate
in an environment that encourages pedestrian-based activities.
While these notions are currently being widely embraced
by developers of all stripes, they have long been the focus
of the work that has been performed by Community Development
Corporations (CDCs) across this country.
For over 30 years, these CDCs and other community-based
organizations have diligently toiled in many of the most
difficult neighborhoods across this country.
Many of these groups began their work by building housing
as the first phase in creating—or preserving—a
decent residential environment. In communities in every
region of the United States, CDCs, along with their various
public/private partners, have been credited with lighting
the fuse that has resulted in a renaissance of housing in
long-abandoned urban neighborhoods and small-town core districts.
This has, in turn, led to greater efforts on the part of
the federal, state and local governments to direct more
resources to these areas.
But this effort cannot be completed without proper attention
being paid to the restoration of the commercial business
districts that are a critical component of this design approach.
As a result, an increasing number of CDCs have ventured
into this area of development to ensure that the livable
lifestyle they are attempting to provide contains all of
the elements families expect to have available to them in
their neighborhood.
For many of these organizations, the use of franchise concepts
to build—or rebuild—these business corridors
represents a “golden opportunity” to advance
the concept of “new urbanism.”
ADVANTAGES
OF USING
FRANCHISE CONCEPTS
First, franchises can provide many products and services
that are familiar and desired by neighborhood residents.
Many of the residents of these communities have become accustomed
to having certain franchise products available to them as
they relocate from other neighborhoods or cities.
The availability of many widely recognized “named”
brands improves the image of the community. Because many
people are aware of the type of research franchise businesses
conduct before locating a store in any neighborhood, the
presence of that brand is often seen as an indication that
the neighborhood has been “green-lined” for
development.
Franchises provide retail concepts that have proven operating
systems and management tools, and that can improve the success
rates of these businesses in restored neighborhoods. Statistics
indicate that about 70 percent of all small businesses fail
within the first five years of operation, but the numbers
for franchises are the reverse—more than 80 percent
are still in business over the same time period.
Many neighborhoods will see reduced costs for goods due
to the franchisor’s greater buying power, as well
as greater quality due to the franchisor’s need to
maintain consistency in all of its stores.
STEPS
FOR CDCS
PROMOTING FRANCHISING
To be successful in bringing franchises to these neighborhoods,
CDCs must be willing to provide a numbers of services.
The CDCs must assess the neighborhood’s needs and
product shortages. This may require them to survey the neighborhood
and gather firsthand data on the products and services that
residents are purchasing outside the neighborhood boundaries.
The CDC may need to hire a firm to do a complete market
analysis of product demand and the level of product support
for the prospective franchisor.
Next, the CDC must evaluate the various franchise offerings
that could meet the neighborhood’s needs. The studies
should be based on broad categories like coffee shop, fast
food, casual dining, etc. Once these have been determined
and demand has been quantified, the CDC can determine which
of the various franchise brands would be most appropriate
for the neighborhood. This should be done in conjunction
with the residents, perhaps through focus groups or an advisory
committee.
Next, the CDC should attempt to identify and assess potential
locations for the business types. While most franchises
are very adept at identifying potential locations, sometimes
the community’s input can be a determining factor
in a brand being properly situated in a neighborhood. This
may aid in brand acceptance and ultimate profitability.
In many cases, the CDC will need to help identify potential
franchisees from the community. While some brands operate
both franchised and company-owned operations, many only
have franchisee-owned businesses. This is a great opportunity
to grow local business owners for the community and maintain
greater local control and responsiveness.
Finally, the CDC must have the ability to assess the availability
of financial and technical assistance for the potential
franchises, and to assess or provide assistance to potential
franchisees that would like to open a business in their
neighborhood.
The result will be a highly livable environment, increased
support for the community-based organization and the activities
it engages in on behalf of the neighborhood, and an increase
in the number of neighborhood-based business owners who
can become a strong voice for the needs and desires of the
entire neighborhood.
