Franchisors Continue DEI Efforts With Emphasis on Education | Franchise News

While the franchise business model provides an opportunity to earn a living and, in some cases, build generational wealth, people of color are still facing a number of barriers to entry and broader racial disparities in the business world. Allie Reid, the retail racial equity and inclusion manager at Ben & Jerry’s, said the biggest issue is access to capital.

“People of color, if you can get access to loans, are going to have higher interest rates,” Reid said.

Opening a franchise isn’t cheap, either. At Ben & Jerry’s, franchisees are required to have a minimum net worth of $350,000, with $100,000 in liquid assets. “The average net worth in Black America today is $16,000,” she said. “Clearly there’s a discrepancy there. So, we need to find an innovative solution to bridge the gap.”

POC-owned firms were half as likely as white-owned firms to receive all the financing they wanted, according to a 2022 study by the Federal Reserve. The study also found businesses owned by people of color were half as likely to be approved for a loan, cash advance or line of credit at a small bank, and about a third as likely to be fully approved at a finance company.

After the murder of George Floyd in May 2020 and following protests worldwide, many franchisors brought on diversity executives to implement initiatives aimed at creating a more equitable path to franchising for minority groups. Franchise Times explored these efforts in a wide-ranging cover story in 2021, “How the Franchise Industry Is Tackling Diversity & Inclusion.”

During the slew of hires, McDonald’s brought on Reggie Miller as its vice president and global diversity, inclusion and equity officer in November 2020. Wendy’s hired its chief DEI officer, Beverly Stallings-Johnson, in March 2021. Pizza Hut promoted Chequan Lewis, then on the brand’s legal team, to chief equity officer in 2020. Lewis has since taken the chief operating offer post at Pizza Hut and Randy Martinez now holds the chief equity officer position. McDonald’s declined to make Miller available for an interview. Wendy’s didn’t respond to requests for comment and Martinez wasn’t available for an interview by deadline.

Wendy’s boasts about its DEI plans on its website, which says the company increased the percentage of non-white employees in company leadership and management positions in 2021 over 2020. But still, the percentage of white employees in those same roles accounted for about 75 percent—which is a slight decrease over 2020. The company created six employee resource groups, including women-focused, Black-focused, youth-focused and veteran-focused groups.

The International Franchise Association has a Diversity Institute within its IFA Foundation that says increasing diversity and inclusion “has the power to accelerate the mission of franchising,” according to IFA’s website. The 20-year-old institute launched its Black Franchise Leadership Council in early 2021, with the goal of increasing business ownership for Black people.

Reid started at Ben & Jerry’s in August 2021. Since then, the franchise has increased its Black franchise ownership from 4 percent to 8 percent. Reid declined to provide how the company will further increase that percentage.

“Ultimately, franchising has always been wealth-building vehicle in Black America. And Ben & Jerry’s is dedicated and committed to continuing that work through our system,” Reid said.

‘There’s always a risk’

The U.S. Supreme Court earlier this year struck down affirmative action in college admissions, “holding that it is a violation of the Equal Protection Clause for institutions of higher education to consider race when making admissions in some, but not all contexts,” according to the employment law firm Morgan Lewis.

The ruling doesn’t directly impact employers or franchising, but it could set a precedent for either, and Morgan Lewis is advising its clients to review their DEI programs. “We anticipate that legal advocacy groups … and like-minded individual lawyers will use this decision to challenge the legality of such DEI efforts and seek to extend the impact of the decision beyond the admissions process in higher education,” a June statement on the firm’s website said.

Attorneys at law firm Lathrop GPM said employers should remain cautious. While the court’s ruling doesn’t directly impact private employers, “there’s always a risk,” Lathrop attorney Carlos White said about creating plans to increase diversity.

“If your DEI draft is consistent with inclusiveness that’s talking about outreach and things along those lines—it doesn’t have specific quotas—then there’s some comfort that … it will be able to pass muster,” White said.

The ruling addresses the idea that affirmative action could, in theory, take away a spot from another deserving student. “In terms of overall workplace, technically, it probably doesn’t” apply, Lathrop attorney Mark Kirsch said. “But we would not be surprised if there will be change moving forward.”

“In franchising, by and large, every franchisor in this country has an almost unlimited number of opportunities,” Kirsch continued. “However the organization defines ‘diverse,’ it’s not necessarily going to exclude somebody else. So, that’s the big difference.”

At Neighborly—the home services portfolio company with brands such as Junk King, Molly Maid and Mosquito Joe—Brian Woods chairs the DEI committee. He’s also the vice president of franchise development for Neighborly’s repair brands, including Mr. Rooter and Glass Doctor.

The DEI committee has existed for about four years and Woods was appointed chair at the beginning of 2023. “My main role is to really help set the strategic direction of what Neighborly wants to accomplish when it comes to diversity, equity and inclusion,” Woods said. Its three strategic objectives are awareness and education, workforce and recruiting, and culture and connection.

“I think one of the biggest things we accomplished is going to be on our awareness and education front,” Woods said. Neighborly created a DEI newsletter that’s sent to hundreds of employees.

“We send something out on a monthly basis that highlights that month: holidays, awareness months,” Woods said. “We incorporate actual team members to do two-to-three-minute video testimonials, talking about that religion, that observance, that background, that holiday, so that our team members can understand different perspectives and different backgrounds and how people appreciate different observances.”

Going forward, Woods is looking to create benefits for franchisees who have diversity recruiting efforts in place. Neighborly is “finding ways to help on the operation side to ensure that our diverse business owners are going to have a high success rate in starting their business,” Woods said.

Plenty of other franchisors have their own diversity initiatives in place, with the common goal to create a more equitable and diverse franchise system.