While women franchise owners have been an often overlooked sector of the small business economy, recent signs point toward positive opportunities, growth, and resources available for female entrepreneurs.
Here is a closer look at some of the trends and what still needs to change to give women small business owners a seat at the franchise table.
Women Business Owners by The Numbers
American Express, in its annual State of Women-Owned Business Report for 2018, found that women-owned businesses opened at a net rate of 1,821 businesses per day. Its findings give insights into the overall state of female entrepreneurship. Among its key findings:
Granular analysis of women-owned franchises tells a similar story about the rise of female entrepreneurship.
Between 2011 and 2017, the number of female franchisors grew 83 percent, compared to 13 percent growth for male franchisors, according to FranNet.
Those data mirror analysis by the International Franchise Association, which showed that women-operated franchises grew to 27 percent of all franchises, up from 20.5 percent in 2007. Another 17 percent of franchises are owned jointly by men and women, usually married couples.
In the U.K., the British Franchise Association and NatWest noted in the 2018 Franchise Landscape report (see PDF here) that 37 percent of new franchise owners in 2017 were women, a 20 percent increase in just two years. Among new franchise owners under 30, 52 percent are female.
What Attracts Women to Franchising?
Why do women choose franchise ownership for their small business? The most common reasons are the same as those for men:
The data point to the evolution of business ownership. In the past few decades, many women balance careers with child-rearing and household management, though that stereotype appears to be evolving.
Still, franchising can be a family-friendly business model. There can be more flexibility and control that allows female franchise owners to achieve the balance they crave.
Funding Challenges Remain
One of the most significant challenges still facing women entrepreneurs is a decided gap in access to capital.
In 2017, the Federal Reserve banks of New York and Kansas City released its Small Business Credit Survey, focusing on women-owned companies. Despite the considerable gains in business ownership, significant barriers remain in getting the much-needed financing to start or grow a business.
"Even as their numbers grow, businesses owned and/or managed by women are encountering significant performance and financial challenges and growth limits,” the report states. “Women-owned firms historically have had lower survival rates, profits, employment, and sales than businesses owned by men— what has been called the ‘entrepreneurship gender gap.’”
The report lays out starkly some of the funding challenges and realities women face:
These barriers create challenges for women owners and it shows in the data, according to the Federal Reserve analysis of 2015 data. Fewer women-owned businesses operate at a profit (50 percent versus 56 percent),
There are some bright signs, however. Slightly more women owners reported an increase in revenue in the past 12 months (52 percent versus 50 percent) and an increase in employees (38 percent versus 34 percent)
Women also have a more optimistic outlook on expected growth. Seventy percent expect an increase in revenues and 44 percent expect to hire more employees. Only 58 percent and 39 percent, respectively, of men expect similar growth.
Another stereotype that needs to be dispelled is that women are risk-averse and therefore less inclined to pursue franchise ownership. Countless studies frame risk as a masculine trait.
However, Grant Thornton studied the role of risk in the workplace and found that the stereotype does not hold up. Women and men perceive risk and respond to it generally equally. In fact, women seem to be more risk aware. Women do not rush to label a situation as a risk,” the report states. “They consider context and nuance to fully understand the implications first.”
Where to Launch a Franchise?
Where are women business owners likely to find networks of other entrepreneurs? According to the Federal Reserve study, the U.S. regions with the largest percentage of women-owned small businesses were:
The American Express study noted that the following states and metro areas had the most positive outlook based on data on women-owned companies from 2007 to 2018:
Fastest Growth Rate
Highest employment vitality
Increased Economic Clout
Attracting More Women Franchise Owners
There is much at stake for lenders, franchisors, and organizations when it comes to women and franchise ownership. More women are continuing to become franchise owners, but the barriers persist – access to capital, the perception of risk aversion, and knowledge about the available opportunities.
Here are a few things that could improve the landscape and encourage more women to become entrepreneurs:
A Partner for Franchise Owners
Given the challenges women face in securing funding, other options need to be explored. Benetrends has provided entrepreneurs with a different choice for decades. With our Rollover as Business Start-Ups (ROBs) strategy, franchise owners can use their existing 401(k) or IRA accounts to finance launch or expansion.
ROBs funding comes with no early withdrawal penalties. In a matter of weeks, you can have the capital you need, without the stressful approval processes, interest rates, and limits faced with traditional lending programs. Benetrends also offers business services to support growing companies, including retirement plan servicing, credit card processing, and business insurance.
To learn more about our services, watch the webinar: How To Use Your Retirement Funds To Buy A Franchise Or Business.
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