Franchising's Community Partner -- CDCs
Models of Expansion in Underserved New Markets

By John Eric Nelson, Director of Corporate Partnerships

The International Franchise Association (IFA) has been teaming up with NCCED and local community organizations to help IFA's membership of 800 national franchisors-and 30,000 members-- access new markets, locations, franchisees, employees, start-up capital, and local partner CDCs.

NCCED's constituency of 3,600 community development corporations each represents about 20,000 residents as well as small businesses, churches, and other organizations. That's a market of over 70 million customers located in underserved urban and rural areas. CDCs can be a vital partner in the search for opening new franchise operations.

The newly passed Congressional "New Markets" legislation provides a package of incentives, including impressive new tax credits for investment in designated underdeveloped areas as long as the investment is linked to a 'certified development entity' such as a CDC. IFA and NCCED are working together to bring these benefits to their respective members as they partner in the creation of new franchising operations. If franchisors are looking for new employees, CDCs can help identify prospects and help train them to suit their needs, as Express Personnel recently discovered when they attended NCCED's annual meeting in Pittsburgh. New sites? Franchisees? Additional sources of capital? CDCs are able to help franchisors access these valuable assets that are in their communities.

Many other franchisors have already attended NCCED meetings including Bass Hotels, Snap-on-Tools, Quiznos, Blimpie, Texaco StarMarts, Ben and Jerry's, Choice Hotels, Sign-a-Rama, Athlete's Foot, Coverall, and Mail Boxes, etc. The next annual meeting in Miami on October 15 to 19, 2002 will feature franchisors as well. Franchise exhibitors are welcome, and there will be many chances for CDCs to speak and network with franchisor leaders from around the country.

Franchising is a sound way to develop new enterprise in the emerging markets served by CDCs. That's why CDCs are excited about teaming up with IFA members. When teamed with local advocates, there is a synergy that can help franchisors, franchisees, and their financial partners. But it's not always easy. And every situation is unique. That's why it's important to look at some case studies of CDCs working with franchise operators and learn from a few lessons in the field. Here are some short selected cases.

McDonalds in Kansas City developed a highly successful new employee training program in a closed outlet locate in the inner city. The recruitment and training was done in cooperation with the Greater Kansas City CDC. The central location of the facility, in an area with higher unemployment, proved to be real assets of the training effort. Successful graduates were then placed in the more than 80 McDonalds outlets the surrounding metropolitan area that were having trouble filling the many jobs being offered in higher employment areas of the region.

Athletes Foot franchisee Calvin Johnson started his first venture some years back thanks to the active support of East of the River CDC in the Anacostia section of Washington, DC. East of the River, led by CDC executive Rhetta Gilliam, helped Calvin identify space and provided essential business planning, the initial financing, and technical assistance, including help in hiring and training new employees from the community. Calvin then went on to expand his operations to new locations nationally, but he never forgot the Anacostia community, and the CDC that helped get him started.

Sign-a-Rama started a new store in the Humboldt Park area of Chicago in partnership with the Latino Franchise Project of the newly formed Latino Economic Development Assistance Corporation (LEDAC). The program was launched by the Hispanic Housing Development Corporation, a seasoned Chicago CDC. LEDAC helped in all aspects of starting-up the business and in turn partnered with the Chicago-based Connections for Community Ownership which operates a loan fund for these ventures. PostNet was the second store in the program and now they are opening a second Sign-a-Rama in 2002.

Ben and Jerry's has a long standing commitment to social engagement and tried a pretty tough assignment in Harlem by opening a store operated by homeless individuals to help them get on their feet. The program was coordinated by a long-time NCCED colleague organization, the Local Initiatives Support Corporation (LISC), primarily a financial intermediary that provides major funding for CDC projects nationally. LISC established its retail initiative in Harlem with some careful (in retrospect perhaps overly restrictive) guidelines, including requirements for CDC equity and local owner residency requirement. The challenges were great for this ambitious effort, which ended up closing, despite the best efforts from all. Ben and Jerry's learned from this effort and extended it with their innovative PartnerShop local store program and has been exploring potential new locations in CDC areas.

Sterling Optical opened a store in New York City's booming Harlem district as a partnership with the Abyssinian Development Corporation, a faith-based CDC run by the nation's oldest African-American church. The primary investors were five successful young African-American MBAs working in New York. Karen Phillips, the highly regarded CDC director, will be the first to tell you that there have been challenges to success, but that each party needs to fulfill its own special role. In this case, the CDC did not have an equity or management position but acted as a local champion for the real estate development, permits, etc. which is perhaps a more familiar role for the CDC to assume.

IFA and NCCED will continue to track case studies of CDCs and franchise operators working together and share these lessons in more detailed case books. If you know of other cases of franchisors working cooperatively with community-based organization, or seek further information, please contact Sonya Brathwaite, Director of Diversity and U.S. Emerging Markets at IFA: 202-662-0784. CDCs can also help identify local entrepreneurs in their community who want to become franchisees and connect them to the NCCED-IFA network of resources, such as IFA's online franchising course.

To register your interest in contacting franchisors or helping individual community entrepreneurs, log on to NCCED's website at www.ncced.org and access the corporate- community Registry. Sign up, identify space or personnel assets that your CDC has, and NCCED will connect you with potential franchising partners. Or call toll free to Candace Baldwin of the Corporate Partnership Program at 202-354-3939.