Womens
Entrepreneurial Growth Through Franchise Opportunities
Dr. Juli-Ann Gasper
Finance 402
April 29, 2002
By:
Becky Berggren
Roo Huelskoetter
Anne Hughes
Jill Stein
Table Of Contents
Executive Summary
.3
Introduction
...
.4
Why
Women Become Entrepreneurs
...
.5
Difficulties in Women Becoming Entrepreneurs ... .. . 6
Why Franchising ... 7
Success of Women Business Owners ... ...8
Example
1
...
...9 Example
2
..9
Example 3 .. 9
Conclusion .. . 10
Glossary ... 11
References ..12
Appendix A .. 14
Appendix B .. 15
Appendix C .. 16
Appendix D ..17
About the Authors ... 18
Executive Summary
Female entrepreneurship has exploded in the United States for a number of reasons, but has also felt the limits of being a minority in the conservative business world. Since World War II, when women were forced to sustain the home front by becoming part of the working class, women have developed a taste for the business world. This new role eventually led women to need autonomy and led them toward entrepreneurship after facing glass ceilings and discrimination in the business world. But, even as the trend of female entrepreneurship grows, women continue to struggle as business owners. One of the major struggles for women business-owners continues to be financial discrimination. For many women, franchising has increased their credibility to lenders and offered them the opportunity to achieve their business goals individually, while also placing them in a non-discriminatory role.
Introduction
Women in the United States have played an important role in our society, but that role has changed in the last century greatly. In the early 1900s women were only here to serve as wives and caregivers for their children. The thought of a women being in the business world was unthinkable until the mid-1930s. During World War II, women went to work in the factory to take the place of the servicemen. When the men returned from war, the women were urged to return to the home. It was after the women were forced out of the factories that womens rights activists began to protest. The protesting did not do enough for women, they still lacked predominate roles in the business industry until the late 1960s. It was then that women began to realize that they could fill a niche in the business world (World Book Encyclopedia, 386)
A book by the name Matilda Harper and the American Dream: How One Woman Changed the Face of American Business supports that it was Matilda Harper who created the franchising concept, a major contribution to the history of business. Her entrepreneurial ways were used to franchise hair salons that remain in business still today, although none of Matildas salons remain under the same name. More importantly, however, are her contributions to business structure through developing the franchising concept (LaGrassa, 1).
Matilda Harper had a vision that not only included business concepts, but a vision for women in business. Harper saw a special something in women that would revolutionize business operations. She saw that women are creative, good listeners, detail-oriented, and friendlier in a business setting. These are just a few reasons why women have emerged as strong entrepreneurs. Society has been shaping these qualities in women progressively through history, but few have put them into use until the last 20-30 years (LaGrassa, 1).
This paper addresses the opportunities, difficulties, and successes of women as entrepreneurs. It is supported with various examples of successful women in different industries. Attached to the body of the paper is an appendix with data further supporting our ideas.
Why Women become Entrepreneurs
There are many reasons why women are
now becoming involved in franchising, but the main catalysts are changes in our
society and the more equal opportunities that women are facing now. These changes are supported with astounding
comparative data over time and gender. According to a 2000 press release from
the White House, The Clinton-Gore Administration Accomplishments for
Women-Owned Businesses, women are becoming business-owners at a rate twice
that of males and staying in business longer (www.momsrefuge.com). Since 1987, the number of female business
owners has more than doubled, with more than 60 percent of these businesses
being started in the home (Refer to Appendix A) (US Small Business
Administration).
Working from home is one of the major reasons women find entrepreneurship beneficial: they are able to stay home to fulfill their other roles, since women are not seen as solely business persons (http://www.tlmanage.com/moms). Rather, societal standards still value women as mothers, wives, caretakers, cooks, homemakers, etc. A home workstation allows women to maintain these other roles while pursuing their outside business interests. Working at home has several benefits for a woman (or any individual): she is able to work at her convenience, she avoids daily commuting, and she can deduct some of her home expenses for business expenses for tax advantages (http://www.tlmanage.com/moms).
However
compelling working at home may be, women begin their own businesses for
numerous reasons, beyond the desire to stay at home. An article from the Womens Businesses Center (www.nfwbo.org)
cited a growing economy and inflation as a cause for the increase in women
starting their own businesses.
(Although these do not seem to be relevant at this time, they were once
causes and are sure to be again.) A
growing economy and rise in inflation rates makes it difficult for many
families to survive on a single income and the mother starts a business to
supplement this need for increased income (www.nfwbo.org).
Others reasons include rapidly advancing opportunities in technology, discrimination in the workforce, low market salaries, and the desire for increased flexibility. Technology has led to web-based businesses that are often easier to start than land-based businesses, with a surprising amount of how-to research on this type of start-up. Gender discrimination and sexual harassment in the general business setting may lead many women to avoid these issues by starting their own business (http://www.tlmanage.com/whyown).
Along with gender discrimination is salary discrimination and glass ceilings for females. According to the article, Why Women Are Starting Their Own Businesses, a woman and a man could be working the same job and performing at the same level with the same performance reviews and, most of the time, the woman would be making less money than the man. This inequality is an obvious reason for women to desire to be on their own in business; entrepreneurs are given total control of their business activities and are able to schedule their days accordingly. (http://www.tlmanage.com/whyown).
Salary discrimination is an important factor in women deciding to start their own business. Herbert Stein, a senior fellow at the American Enterprise Institute, noted in his article The Equality Equation: What Explains the Disparity in Male and Female Pay? that 30 year old women without children earn 95% as much as men. Mothers at the same age earn only 75% as much as men. Stein attributes this to womens lower productivity due to children interfering with their job. He later notes that the gap between men and womens salaries has been historically declining (Stein).
One field in which this salary difference is greatly apparent is information technology (IT). This is so shocking because IT is considered to be one of the most advanced fields, and yet a historical discrimination such as this still exists. One such explanation for this is that women are a minority in the field. Women account for only one third of the industrys workforce. This forces salaries to differ due to the varying education levels, experience levels, and seniority of male and female employees (See Appendix B) (www.computerjobs.com/salary98/salary_gender.cfm).
A frustrating previous work environment creates a temptation for women to begin their own businesses. Women continuously watch men pass them for executive positions and women often struggle to get respected positions in a company. They face the problem of a glass ceiling, especially in corporate America, but by owning and operating their own businesses, they do not face these difficulties any longer and expansion is a choice they may or may not include in their strategy (LaGrassa, 4-5).
Difficulties in Women
Becoming Entrepreneurs
Although there are many support systems
available for women today to start their own business, there are still
struggles that women face while attempting to enter the business world. Women are minorities in the business world
and they face the same difficulties as all other minorities, such as attitudes,
lack of expertise, lack or capital, and personal barriers.
They must continue to deal with negative prevailing socio-cultural attitudes. These are generally based upon sexual discrimination, and thus, women frequently suffer from low credibility. The older women often face the lack of business experience. Since there has only been a recent rise in the number of female entrepreneurs and executives, women have fewer role models and fewer opportunities for finding women mentors.
One of the most difficult factors is obtaining funds from banking sources. Women business owners still face some of the same barriers of the 1940s 1970s. Often times, women who want to start an enterprise are seen as not meeting the required conditions, such as a positive history of borrowing, property to offer as collateral to secure a loan, and a business track record. Frequently, the bank officials distributing the loans are male and do not think women can handle the money (www.springboard2000.org). However, there has been significant improvement in access to capital for women business owners. Women owners have decreased their use of credit card usage from 52% in 1992 to 36% in 1998. Women business owners are also using their business earnings 65% of the time to finance growth. Over 52% of women business owners had bank credit as of 1998 (www.nwbo.org).
Women also have a number of personal factors that require attention which compete with attention to business operations. In our society, women usually have the primary responsibility for the home, children, and older family members. Although this makes it especially hard for women to devote sufficient time to running a business, most women entrepreneurs learn, with time, to run both sides effectively.
Kathleen K. Diamond, president of Language Learning Enterprises, in an address to female entrepreneurs, cites five of the most common obstacles for female-owned businesses to overcome (Corey). The first was limited access to, or a shortage of, investment capital. In the United States 71 percent of financing of womens businesses comes from women business owners, which shows that women are plowing their funds back into womens businesses. Although this helps to fuel the expansion of their own business sector, it is still discouraging to women that men are not recognizing their potential. It is a gentle reminder that the playing field is still unequal (Corey).
The second of Diamonds obstacles includes the lack of established informal networking ties where it matters most: banks and financial institutions (Corey). This may seem like a little hurdle, but it requires time, the building of a trusting relationship with bankers, and a conscious effort of the entrepreneur to (1) establish ties and then (2) begin marketing oneself for a loan. This can pose a serious opportunity cost to the businesswoman when her time may be much better utilized within a different facet of the business (Corey).
The last three common problems female entrepreneurs encounter include limited access to markets, training and policymakers who influence business-related policy (Corey). These limits make it difficult to obtain proper management training or identify effective marketing techniques. Diamonds speech continually highlights the importance of a collaborative female effort. Females, however, have received outstanding increases in support and resources available to help them overcome the problems of limited access (Nix). Non-profit organizations, such as Springboard Enterprises and the Center for Women & Enterprise, have contributed to the challenges of being a female entrepreneur, providing coaching, technical assistance and access to investors (Nix). With the advice of Diamond, the consumers of these services will collaborate and succeed by accumulating knowledge of being a woman in a mans business world.
Women entrepreneurs have created businesses that have affected our country greatly and consumers are grateful, with a lot of credit going to female businesswomen achieving breakthroughs in corporate America (www.springboard.com/news). With their efforts of establishing a female presence at that level, female entrepreneurship will become a more widely accepted practice. Until that point, however, hard work, a good education, experience, confidence and a network of support and contacts, Diamond predicts, is making the future of women in business look bright (Corey).
Why Franchising:
Women have not only found rewards in starting a business from their own ideas, but also turned to franchising as a means of having their own business. The franchised business can alleviate one of the major problems women encounter as entrepreneurs: discrimination of loan officers toward female entrepreneurs. Women have a distinct benefit to obtain funding in franchising because that company has a proven track record for the lender to examine before giving the loan. The franchise also gives a very good estimate, if not an exact amount, of starting capital the franchisee would need if they were to acquire a franchise.
The process of securing a loan can often times be difficult. Banks are generally cautious in lending money, particularly to new ventures, since they do not want to incur bad loans. The bank-lending decisions are made according to the five Cs of lending: character, capacity, capital, collateral, and conditions. There are several ways the borrower can increase their chance of receiving the loan. It is very important to provide a good loan application. This will give insight into the creditworthiness of the individual and the venture, as well as the ability of the venture to repay the loan and the interest. Having high profitability in past financial statements and strong future projections indicate the firms commitment to the business and ability to repay the loan. The borrower should have sound assets to offer as collateral in the event of default. If there is little or no track record, limited experience in financial management, or few assets available, it is essential for the borrower to present his or her capabilities and the prospects for the company in a way that elicits a positive response from the lender (McGraw-Hill, 162-3).
There are industries that are known as masculine and some that are thought of as feminine. For example women are the franchisors of companys such as Computer tots, Jenny Craig, Merle Norman Cosmetics, and Womens Health Boutique. These businesses are considered to be feminine companies and started by women, so it makes sense that strategists would create a business that appeals to women. One very successful franchiser took a chance and entered into the masculine industry with a moving company.
The number one reason for women to begin their entrepreneurial career in franchising is that they have been encouraged by an entrepreneurial idea (LaGrassa, 3). These ideas are of all types, and are not just coming from women. The new idea of co-branding, new trendy or regional food concepts, quick business services, and even daycare are examples of ideas that women are having as they start their own businesses (Lawson, 3). All franchises started from one persons idea and the realization of moneymaking potential by forming a niche in an industry and women are now realizing that their ideas are valuable to our society as well.
Success of Women Business Owners
According to the National Foundation for Women Business Owners, there are 9.1 million women-owned firms in the United States, representing 38 percent of all businesses. These businesses employee over 27.5 million people and they generate over $3.6 trillion in sales. Between the years of 1987-1999, the number of women owned businesses increased by 103 percent across the United States (LaGrassa, 3).
According to a survey conducted in several foreign countries, women-owned businesses are most common in traditional manufacturing activities such as beer brewing, knitting, dressmaking, crocheting, and grass and cane work, as well as in retail trading (http://www.mip.org/pdfs/usaid/mdobrf24). Women are taking many of their domestic skills and capitalizing on them to earn a profit. (Refer to Briggs for financial characteristics of Mary Kay Cosmetics, Pampered Chef, Creative Memories, and Parties Plus. http://cobweb.creighton.edu/fin402)
Example:
Susan Manwaring was the first franchisee of Batteries Plus and an excellent example of the financial security risks a family takes when their mother begins a business. Susan and her husband opened the first Battery Plus in 1992 and there were no other franchisees because the offering circular was not completely put together yet. The thought of making a living by just selling batteries boggled Susans mind, but they liked what the franchisor had to offer them and they opened Ronald Rezetkos first store. Just the one store was not enough income for the Manwarings, so they created a chain of Battery Plus locations. Susan wrote the business plan for the stores, found the real estate, and raised four teenage children in the process. Today, Susan oversees the operations of seven Battery Plus stores on her own and her husband is back to his previous job as a consultant. Susan is a very successful franchisee due to the risk family took with the selling of batteries (LaGrassa, 2).
Example:
Two women from New York met while they were traveling with their husbands at an Exxon convention; their husbands both owned service stations in the New York area. Eileen Caccavone and Jan Pitman decided to start a small business. Caccavone had no prior work experience, and Pitman had a minimal amount of experience in the retail field. This was in the early 1990s when the Just-A-Buck store concept was coming out. The two opened the first franchise of the store in the New York area, and less than ten years later they are entered in a very competitive retail industry with five stores in the New York and Connecticut area. Not only have they remarkably expanded their stores, but also they have consistently ranked in the top 10 on the chains weekly list of highest average sales per customer, which makes since if everything is a dollar. The two met because of their husbands businesses, but now their husbands have sold their service stations and they work for their wives (LaGrassa, 3).
Example:
Mary Ellen Sheets used her family to create what is now known as Two Men and a Truck, in the mid 1980s. Mary Ellens two sons decided to make money by helping people in the neighborhood move. The boys used an old pickup truck and a classified ad that read, Two Men and a Truck. After Mary Ellens sons left for college, the calls kept coming in requesting the help of her sons to move. So Mary Ellen took over her sons business and ran it from their home. The only money Sheets invested into the company was $350 for a new truck, which is a small investment for what the company is now (LaGrassa, 3). Briggs reports that the start-up costs for four common franchise opportunities for businesses run out of the home range from $100 to $1000.
Mary Ellen decided to franchise her idea after another woman approached her following a speech Sheets had given. By 1993, the company was big enough for Sheets to get an office and today it is the seventh-largest mover in the United States. Not only did Sheets step into the masculine industry, but from 1992-1999 the greatest growth in the number of women owned businesses was seen in construction, wholesale trade, transportation, agriculture and manufacturing, which are all non-traditional areas for women (www.nfwbo.org).
Conclusion
Despite the difficulties women have encountered as
entrepreneurs, women
business-owners have achieved great successes and
continue to help one
another in their struggle by forming women
business-owners organizations,
such as the National Association for Women
Business Owners. With this
support, women continue to carve their niche in
the business world as
entrepreneurs, opening businesses at twice the
rate of males. The special
something Matilda Harper saw in women has allowed
them to prosper as
business people and gain respect and confidence
equal to their male
counterparts. Although women have been a
part of the working class since
World War II, their success in escaping the
minority classification in the
business world is evidenced by their achievements
in obtaining financing
without the co-signing of a male.
Glossary
Co-Branding: One brand that is
associated in an action with another (Websters
Ninth New Collegiate Dictionary, 252).
Credibility: The quality or power of inspiring belief (Websters Ninth New Collegiate Dictionary, 305).
Entrepreneur: One who organizes, manages, and assumes the risks of a business or enterprise (Websters Ninth New Collegiate Dictionary, 416).
Franchising: A special privilege granted to an individual or group especially the right to be an exercise the powers of a corporation. (Websters Ninth New Collegiate Dictionary, 489).
Franchisor: One that grants a franchise (Websters Ninth New Collegiate Dictionary, 489).
Gender Discrimination: Treatment or consideration
based on class or category rather
than individual merit; partiality or prejudice: racial discrimination;
discrimination against foreigners, gender (http://www.dictionary.com/search?q=Discrimination).
Glass Ceiling: An unacknowledged discriminatory barrier that prevents women and minorities from rising to positions of power or responsibility, as within a corporation (http://www.dictionary.com/search?q=Glass%20Ceiling)
Investment Capital: Wealth in the form of money or property, used or accumulated in a business by a person, partnership, or corporation (http://www.dictionary.com/search?q=Capital).
Minority: A part of a population differing from others in some characteristics and often subjected to differential treatment (Websters Ninth New Collegiate Dictionary, 757).
Sexual
Harassment: The making of unwanted and offensive sexual
advances or of sexually offensive remarks or acts, especially by one in a
superior or supervisory position or when acquiescence to such behavior is a
condition of continued employment, promotion, or satisfactory evaluation (http://www.dictionary.com/search?q=sexual+harassment&r=2).
Socio-cultural attitudes: Thoughts or beliefs of or involving both social and cultural factors (http://www.dictionary.com/search?q=socio-cultural)
Bibliography
Briggs,
Christina. Independent Consultants for Small Business. http://cobweb.creighton.edu/fin402
Bureau of the Census and Center for Womens Business Research. 2001.
Corey, Charles. Women Entrepreneurs Find Strength in Unity. USIA 23 Sept 1997.
Fenwick, Laura. Mission Possible: Create More Franchising Opportunities for Women. Franchising World April 2001. Vol. 33, pg. 24-26.
www.computerjobs.com/salary98/salary_gender.cfm Gender Comparisons of IT Positions
http://www.franchise.org/. General Information, Womens Franchise Committee
http://jlarc.state.va.us/summary/rpt212/pay.html. Technical Report: Gender Pay Equity in the Virginia State Workforce.
http://www.momsrefuge.com/career/0011/biznotes/index.html - 1. Cracking the Glass Ceiling.
http://www.naowbo.com/. General
Information, National Association of Women Business Owners.
http://www.springboard2000.org/. General Information, Springboard Enterprises.
http://www.nwbo.org/key.html. Key Facts, Center for Womens Business Research.
LaGrassa, Kara. A Fine Future for Female Franchisors. Franchising World Nov/Dec 1999. Vol. 31, pg. 18-22.
LaGrassa, Kara. A Tale of Three Success Stories. Franchising World April 2001. Vol. 33, pg. 17-18.
Lawson, James. Women and Minorities Strike Franchising Gold. Franchising World Sep/Oct 1999. Vol. 31, pg. 5-8.
Larson, Polly. Women in the Corner Office. Franchising World April 2001. Vol. 33, pg. 20-22.
McGraw-Hill. Entrepreneurial Finance. Ed. Juli-Ann Gasper. United States, 2001.
Nix, Joanne. Women Entrepreneurs More Numerous Worldwide, Still Growing. USA 29 July 1997.
Plitt, Jane R. Matilda Harper and the American Dream: How One Woman Changed the Face of American Business. Syracuse University Press. May 2002.
SBA Office of Advocacy, Minorities in Business, 1999: SBA Office of Advocacy, Small Business Economic Indicators, 1998, March 2000
Scott, Nancy. Minorities Take Franchising New Places. USA Today
Smith, Gloria. A Survival Kit for the Female Franchisor. Franchising World April 2001. Vol. 33, pg. 12-16.
Smith, Gloria. Franchise Careers for Women. Franchising World Mar/Apr 2001. Vol. 32, pg. 8-16.
Stein, Herbert. The Equality Equation: What Explains the
Disparity in Male and Female Pay?. April
22, 1999. www.aei.org/ra/rastein11.html.
US Small Business
Administration. Survey of Minority
Owned Business Enterprise: 1992
Women and Minorities in
Franchising and Financing Practices. Research
Summary by Women in Franchising Inc.
Chicago, Illinois. May 1999.
World Book Encyclopedia. World Book, Inc. Chicago: 2001.
Appendix A
|
All Minority Owned Firms |
|
|
|
|
|
|
|||
|
|
|
|
|
|
1982 |
1987 |
1992 |
1997 |
1987-1992 |
|
|
Number of Businesses |
|
|
|
|
|
|
||
|
|
|
All |
|
|
736,064 |
1,211,017 |
1,979,056 |
3245127 |
168% |
|
|
|
Businesses With Employees |
119,232 |
247,678 |
313,031 |
522,942 |
111.1% |
||
|
|
Nominal Annual Receipts
(thousands) |
|
|
|
|
|
|||
|
|
|
All |
|
|
34,181,238 |
77,744,780 |
202,683,780 |
494,703,206 |
342.80% |
|
|
|
Businesses With Employees |
21,820,541 |
56,394,339 |
159,252,282 |
430,647,362 |
431.50% |
||
|
|
Employees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
445840 |
837158 |
1877690 |
3868649 |
362.10% |
|
|
|
|
|
|
|
|
|
|
|
Source: US Small Business
Administration, Office of Advocacy, based on data from US Department of
Commerce, Bureau of the Censes, Survey of Minority Owned Business Enterprises, 1982, 1987, & 1992.
Appendix B
Gender Comparison of IT Positions
Source: www.computerjobs.com/salary98/salary_gender.cfm
Appendix C
Appendix D
Source: SBA Office of Advocacy, Minorities in Business, 1999: SBA Office
of Advocacy, Small Business Economic Indicators, 1998, March 2000; note: All firms Sales data annualized from 1990-1997.
About the Authors
Becky Berggren
Becky Berggren is a graduating senior at Creighton University, double majoring in marketing and finance. Having parents who started and still run a construction company in central Nebraska, Berggren has been interested in entrepreneurial studies for many years. Her knowledge of running a business started during her high school years, as she would help with bookkeeping, bids, and house plans. Entrepreneurial classes at Creighton have enhanced her skills, and increased interest in the subject area.
Roo
Huelskoetter
Roo
Huelskoetter is a senior finance, marketing co-major in the College of Business
Administration at Creighton University in Omaha, Nebraska. Her classes at Creighton University have
included Entrepreneurial Finance and Franchising and Small Business
Marketing. She is currently an intern
at Berkshire Hathaway Homestate Companies in the retail-underwriting
department. Next year Roo will be doing
volunteer work in Mobile, Alabama for the Jesuit Volunteer Corps.
Anne Hughes
Anne
Hughes is a senior entrepreneurship major at Creighton University, graduating
in May of 2002. Her entrepreneurial
studies at Creighton have been intense and have prepared her for the future. Currently Anne works as the office manager
for a real estate agent in Omaha, NE.
As the office manager, Anne does all of the marketing and communicates
with the customers on a daily basis.
Her communication skills are vital in her work and have been perfected
at Creighton. Anne will continue work
in the real estate field after graduation and become a licensed realtor
herself.
Jill Stein
As a senior entrepreneurship major at Creighton University, Jill Stein started pursuing serious entrepreneurial ventures during August 2001 by helping launch Pizza Planet, Inc. in Omaha, Nebraska. This endeavor began with the vision of Internet tycoons Josh and Justin Eveloff. The brothers, 22 and 19, respectively, started their entrepreneurial ventures through email marketing campaigns with a company called oDiets, Inc. Stein was commissioned to join the oDiets to launch Pizza Planet. Steins major role occurred during the companys infancy to assist in management, accounting, marketing, and strategic planning. The privately held company has plans for expansion and, ultimately, franchising and public offering.