Getting a foot in the door of business ownership is easier thanks to franchising initiatives that aim to pump new economic blood into anemic inner-city communities.
Four years ago, the nonprofit Local Initiatives Support Corp. (LISC) and Deutsche Bank created the Neighborhood Franchise Project (NFP). Launched in the New York City area, its mission is to encourage national franchises to create opportunities for minorities in underserved neighborhoods such as Harlem, Bedford-Stuyvesant and Coney Island. LISC provides financing to community development corporations (CDCs) in 43 cities throughout the U.S.
The NFP provides potential minority franchisees with technical assistance and low-interest loans that are offered through LISC and Deutsche Bank’s pool of $4 million in capital. Participants must contribute up to 20% or more of the business cost, and NFP will then loan the other 80% at interest rates of 6% or 7%. CDCs identify entrepreneurs and real estate, help entrepreneurs sign agreements with franchisors, screen potential workers, help secure building permits and approvals, and address other concerns to help ensure successful ventures.
Potential candidates (individuals or group investors) must have prior business or management experience. LISC prequalifies entrepreneurs to confirm their available resources, prior business experience and ability to implement a business concept.
“This [NFP] program seeks to make people aware of the opportunities and provide for access to financing options,” says Debbie A. Smith, vice president of public affairs and emerging markets for the International Franchise Association (IFA), which represents some 30,000 franchise owners and suppliers, some of which have participated in the initiative. “In the past, many franchisers have not focused on inner-city neighborhoods because of the difficulty of convincing banks and other lending institutions to back the projects. But demographics of the inner city are changing. The ethnic community is becoming the majority.”
NFP has helped finance two ventures: in 1998, an African American-owned Sterling Optical franchise developed by the Abyssinian Development Corp. and the Skipper Group in Harlem, and last December a SIGN-A-RAMA franchise developed by Astrudge McLean (who is African American), Eddie Mark and Astella Development Corp. in Coney Island.
In Chicago, another innovative project is The Franchise Partnership (TFP), developed by the Center for Neighborhood Technology, Chicago United and Hispanic Housing Development Corp. TFP is a one-year-old Chicago nonprofit that acts as a conduit between prospective franchisees, franchisors and lending institutions.
TFP identifies qualified minorities who want to go into business and franchisors with solid backgrounds and a track record of success, explains Torrio Osborne, the organization’s business development officer. Clients must be dedicated to becoming entrepreneurs and capable of supplying at least 10% of the funding needed to finance the business.
Those who get to the next step are then eligible for funding from a $2 million loan fund established by a group of five regional banks and major foundations, including Citibank, Bank of America, First National Bank of Chicago, the Amoco Foundation and the John D. and the Catherine T. MacArthur Foundation. “With that, we reduce the need for owner’s equity and reduce the risk to a lending institution,” says