Franchising Was Designed for Black Entrepreneurship — The Numbers Prove It

There is a sentence that has been repeated so many times in so many motivational seminars, so many church services, so many barbershop conversations, that it has acquired the quality of scripture: “I want to own my own business.” It is the American catechism, and in Black America it carries particular weight because it represents the antithesis of what our ancestors were forced to be — someone else’s property, someone else’s labor, someone else’s balance sheet entry. The desire for ownership is deep, legitimate, and holy in its way. But there is a difference between wanting to own a business and wanting to own a profitable business, and the gap between those two sentences has swallowed more Black savings, more Black credit scores, and more Black retirements than any redlining map ever drawn.

Here is a number that should reframe the entire conversation about Black entrepreneurship: according to the Bureau of Labor Statistics, approximately 20% of new businesses survive past their first year, and roughly 50% fail within five years. For independent restaurants, the failure rate within the first year approaches 60%. These are national averages. For Black-owned businesses, which are disproportionately undercapitalized, the numbers are worse. The Census Bureau’s Annual Business Survey shows that Black-owned businesses have average startup capital of approximately $35,000, compared to $107,000 for white-owned businesses. Undercapitalization is not a character flaw. It is a mathematical death sentence.

Now here is the number that nobody in the “buy Black” movement wants to discuss: franchise businesses have a survival rate that exceeds 90% over the first five years, depending on the brand and sector. The International Franchise Association reports that the franchise model contributes approximately $827 billion to the U.S. GDP and employs nearly 8.7 million people. And here is the number that matters most: Black franchise ownership is growing at approximately three times the rate of any other demographic group in the United States.

Why the Franchise Model Works

The franchise model is, at its core, an answer to the three things that kill independent businesses: ignorance of the market, ignorance of operations, and undercapitalization relative to the learning curve. A franchise provides a proven system — not a guess, not a hope, not a vision board, but a documented, tested, refined operational system that has already failed in all the ways a business can fail and has been corrected accordingly. It provides training, not just at the start but continuously. It provides brand recognition, which is the single most expensive thing a new business must build and the thing most new business owners catastrophically underestimate. And it provides supply chain access, which means purchasing power that no independent operator can match.

Castrogiovanni, Combs, and Justis, in their comprehensive analysis of franchise failure rates, found that the franchise model reduces business failure not because franchisees are better entrepreneurs — they are not, by any measurable metric — but because the model itself compensates for the gaps in knowledge and capital that destroy independent businesses. The system does what the individual cannot. This is not a weakness. This is intelligence.

The distinction between “I want to own a business” and “I want to own a profitable business” is the distinction between pride and strategy. Pride says: I should build something from nothing because that proves my worth. Strategy says: I should build something from a proven model because that protects my family’s future. The first sentence is poetry. The second is mathematics. And mathematics is what builds wealth.

Herman Petty and the McDonald’s Model

In 1968, Herman Petty became the first Black McDonald’s franchisee in the United States, operating a restaurant on the South Side of Chicago. This was not a charitable gesture by McDonald’s. It was a strategic response to the reality that white franchisees were abandoning inner-city locations after the riots following Martin Luther King Jr.’s assassination, and the company needed operators who would stay. Petty stayed. He did more than stay. He built a business that employed dozens of people from his community, that provided entry-level job training to teenagers who had no other options, and that demonstrated something that the entire Black entrepreneurship conversation has been reluctant to acknowledge: you do not need to invent the wheel to build wealth. You need to operate the wheel better than anyone else.

McDonald’s today has more than 900 Black franchisees operating over 1,800 restaurants, and these operators collectively employ more Black workers than many of the corporations that issue annual diversity statements. The average McDonald’s franchise generates between $2.7 million and $3.2 million in annual revenue. These are not symbolic numbers. These are wealth-building numbers, the kind that produce generational capital, that fund college educations, that allow the second generation to start from a position of strength rather than a position of survival.

“I am not interested in being the first Black anything. I am interested in being the best operator in the system, because that is what my community deserves — not a symbol, but a standard.”
— Janice L. Fields, former President of McDonald’s USA

The Chick-fil-A Exception

If there is a franchise model that seems almost engineered for Black entrepreneurship, it is Chick-fil-A, and the reasons are worth examining because they illuminate what the conversation about Black business ownership consistently misses. Chick-fil-A’s operator model requires an initial investment of just $10,000. Not $500,000. Not $1 million. Ten thousand dollars. In exchange, the company selects, trains, and supports operators who run restaurants that average $8.1 million in annual revenue — the highest per-unit revenue of any quick-service restaurant chain in America.

The catch is that Chick-fil-A is extraordinarily selective. The acceptance rate for operators is approximately 1%, lower than the admission rate at Harvard. Applicants go through a multi-stage process that evaluates not just business acumen but character, community involvement, and operational temperament. The company retains ownership of the restaurant and the real estate. The operator receives a salary and a percentage of profits, typically resulting in annual earnings between $200,000 and $500,000.

This model eliminates the two barriers that most frequently prevent Black entrepreneurs from entering franchising: the franchise fee and the real estate requirement. It also eliminates the risk of total loss that haunts independent business ownership. You cannot lose your life savings in a Chick-fil-A because you never invested your life savings. What you invested was your competence, your work ethic, and your willingness to operate within a system that has already solved the problems you would spend years solving on your own.

The Barriers That Remain

None of this is to suggest that franchising is without obstacles for Black entrepreneurs. The barriers are real, documented, and in some cases deliberately maintained. The average initial franchise investment across all brands ranges from $100,000 to over $1 million, depending on the concept. For brands like Hilton Hotels, the investment can exceed $5 million. Access to this capital requires creditworthiness, collateral, and often existing business relationships with lenders — all of which are constrained by the legacy of discriminatory lending practices that have left Black households with one-eighth the median wealth of white households.

The SBA’s franchise lending programs are a partial answer. SBA 7(a) loans can cover up to 90% of franchise startup costs, and the SBA maintains a franchise directory that pre-qualifies certain brands for streamlined lending. But Black entrepreneurs apply for SBA loans at lower rates than white entrepreneurs, and when they do apply, they are approved at lower rates and receive smaller loan amounts, even when controlling for credit scores and business plans. A 2019 Federal Reserve study found that Black-owned firms were approved for only 29% of the financing they sought, compared to 76% for white-owned firms.

The solution is not to lament these disparities. The solution is to navigate them strategically. Community Development Financial Institutions (CDFIs) have emerged as a critical alternative lending channel for Black franchisees, and the IFA has partnered with several CDFIs to create franchise-specific lending programs. The Veterans Administration offers franchise lending to Black veterans, who are overrepresented in the military relative to the general population. And several franchise brands, recognizing the business case for diverse ownership, have created their own financing programs specifically targeting Black and minority operators.

The Multi-Unit Operator Path

The real wealth in franchising is not in owning one location. It is in becoming a multi-unit operator — someone who owns five, ten, twenty, or more franchise locations and operates them as a portfolio. Multi-unit operators account for approximately 54% of all franchise units in the United States, and they represent the franchise industry’s version of the landlord model: build a system, hire managers, collect returns, and reinvest.

Black multi-unit operators are emerging as one of the most significant wealth-building cohorts in Black America, and their stories are conspicuously absent from the mainstream narrative about Black economic progress. Janice Branch, who operates multiple Wendy’s locations in the Southeast, employs hundreds of people and generates millions in annual revenue. Kevin King operates dozens of Taco Bell locations across multiple states. These are not celebrities. They are not athletes. They are not entertainers. They are operators — people who chose the discipline of a proven system over the romance of starting from scratch — and they are building the kind of multi-generational wealth that the Black community has been told for decades is impossible without reparations or a government program.

What the Community Must Decide

The conversation about Black business ownership has been dominated for too long by a romanticism that conflates entrepreneurship with independence and independence with starting from zero. This romanticism has a body count. It is measured in depleted savings accounts, in second mortgages that were never recovered, in credit scores that were destroyed pursuing a dream that had no operational foundation. The most dangerous sentence in Black entrepreneurship is “I’m going to do it my way,” because “my way” usually means without the training, without the systems, without the supply chain, and without the brand recognition that determine whether a business survives its first three years.

Franchising is not a guarantee. There are franchise systems that are poorly managed, that charge excessive fees, that provide inadequate support. Due diligence is essential, and the FTC’s Franchise Disclosure Document (Item 19, specifically) provides the financial performance data that every prospective franchisee should study before signing anything. But the model itself — the idea that you can leverage someone else’s proven system, someone else’s brand equity, someone else’s operational knowledge, and apply your own sweat equity to build wealth in your own community — is the closest thing to a guaranteed path out of the wealth gap that exists in American capitalism.

The question is not whether Black America can build businesses. That question was answered a century ago in Tulsa, in Durham, in Richmond, in every Black business district that was built, burned, and built again. The question is whether Black America will choose the path that the data says works — the path of proven systems, of disciplined operations, of building wealth through models that have already survived the failures that destroy independent businesses — or whether we will continue to sacrifice our capital on the altar of a romanticism that feels good and produces bankruptcy at a rate that should make every financial advisor in the country weep.

Herman Petty did not invent the hamburger. He operated a system that made hamburgers profitably, and he built wealth for his family and employment for his community. That is not a lesser achievement than invention. In a community that has been systematically denied access to capital, to credit, to the accumulated knowledge that other communities pass down through family businesses, it may be the greater achievement. And it is available, right now, to anyone willing to trade the romance of doing it alone for the discipline of doing it right.