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TheStreet Open House

Why Aren't There More Hispanics in Franchising?

Stock quotes in this article: HRB, BKS

Torres points to a low headcount in many franchisors' management and executive teams. "In general that is the handicap. When you don't have inside your company a workforce that can identify with that at the executive or management level it's tough to go after it," he says.

Guillermo Perales, the largest Latino franchisee and CEO of Sun Holdings, owner of nearly 400 franchises in the Dallas-Fort Worth area, including Arby's, Popeye's, Golden Corral, Burger King (BKC), CiCi's and Del Taco, says more franchisors need to incentivize their teams to bring on Hispanic franchisees.

"I don't think they're actively seeking franchisees because in their mind it's not a top priority," he says. "They don't have outreach programs to look or bring or incentivize some Hispanics to come into the system."

>>>Refranchising Gets Hot Again In The Restaurant Industry

At Burger King, "I've been able to send a couple of Hispanic candidates to grow our base. They also have a small program where if you have the resources, you can start by operating the store with no real estate and you pay for equipment and business," Perales says. "That's an easy way for franchisors to start incentivizing the employee that have been with them for a long time."

Many franchisors also don't understand the financial and cultural differences within the group.

"It's not one-size-fits-all. All Latinos are a little bit different. Some franchisors don't really understand the culture. A Latino here from Mexico for three generations is different from a first-generation person that moved from Brazil. There is different type of mentality and type of Spanish," Perales says.

While the level of affluence in the Hispanic market is growing "exponentially," Latinos in general are less likely to have strong credit profiles because there is a general mistrust in banks. Many don't use credit cards and prefer to put their money into hard assets or other currency, Torres points out.

"The financial profile on paper raises a lot of questions," he says. "They have a different behavior when it comes to managing their finances, and franchisors have to recognize that before disqualifying -- dig deep into what is exactly his financial profile and why his credit profile is so low. Franchisors either don't have the time or the energy" to do that.

One franchisor that seems to be making headway with the Hispanic community and in adding Hispanic franchisees is Liberty Tax Service.

Torres notes that the tax preparation services franchise "has done what I call everything right," he says.

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