Over the past decade, the number of women venturing into franchise ownership has grown significantly. According to a study commissioned by the International Franchise Association’s Franchise Education Foundation, the rate of female-owned franchises grew by around 10% from 2007 to 2012.
My company specializes in franchise research, and our recent Women in Franchising Report underscored these findings. We found that over the past decade, there has been a 24% increase in women-owned franchise businesses. Of all new franchises opened in the past 24 months, 41% are women-owned businesses. This represents gigantic progress for women entrepreneurs.
The positive trend of women franchise ownership is also reflected in the greater economy where the number of women-owned businesses grew by 58% from 2007 to 2018, compared to the national average of 12%, according to a report commissioned by American Express.
In addition to the growth in numbers, my company’s research also determined that women franchisees report high satisfaction and rate their franchise company higher than men, particularly in the area of leadership and senior management. To me, this makes sense. A 2016 study conducted by Korn Ferry Hay Group found that women tend to outperform men in most areas of emotional intelligence. These skills can be very beneficial in a franchise organization, specifically when teamwork and executing an existing business model are keys to success.
I believe one of the big drivers of this positive shift in women-owned franchises could be financially driven. Female franchisees who have owned their businesses for at least two years report annual average earnings of $88,000 in income and business profits, compared to the average 45-year-old female employee (non-business owner) working full-time, who currently earns around $48,000 annually. But despite the great success of women in franchising, they are still earning less than men.
It’s encouraging to see women gaining more representation in the historically male landscape of franchising. But as I dug into research from my company and others, the earnings gap between men and women became clearer to me. Here are a few contributing factors that I believe shed light on the earnings gap:
1. Women invest in lower-earning business sectors.
My company’s study found that high-earning franchise investment opportunities in the food, automotive and hotel sectors are still predominantly owned by men. On the other hand, 64% of franchises in the child services sector are owned by women, followed by travel, boutique fitness and education and tutoring — all of which are sectors dominated by women franchise owners. The American Express State of Women-Owned Businesses Report confirms this trend, showing that the majority of women business owners invest in three industries: health care, professional/technical services and other services.
2. Many female franchise owners seek flexibility.
I see many women entrepreneurs looking to enter businesses that offer schedule flexibility, such as the travel sector, where business owners can choose to work part-time and still earn a good living. A study by ManpowerGroup found women workers tend to prioritize a flexible schedule more than men. While the majority of women franchise owners work at least 40 hours per week, they clock roughly 10% fewer hours on average than their male counterparts, according to my company’s study.
The gender income gap could also be reflective of women’s motivation to go into franchising in the first place. Because many women are looking for flexibility, they might seek out home-based franchise opportunities that typically require fewer hours and a lower initial investment — but don’t typically yield the highest revenues. These types of franchise businesses can offer women the flexibility they need to juggle career, household and family priorities — which still primarily fall on women.
3. Women tend to build smaller businesses.
Based on my company’s franchise research, women are less likely than men to be “empire-builders,” where they own multiple businesses rather than just a single location. This probably ties back to the flexibility piece; the more locations you own, the more complex your business becomes, and the less lifestyle flexibility you enjoy as an owner. Not surprisingly, I’ve observed it is multi-unit franchise owners that have the highest incomes in franchising, which can average well over $200,000 annually.
4. Women have a harder time securing funding.
One area we need to improve upon for women is providing equal access to start-up capital. According to an analysis by Fundera, male entrepreneurs were 20% more likely to receive a loan than female entrepreneurs. And, in a Small Business Credit Survey commissioned by the Federal Reserve Banks of New York and Kansas City, it was reported that low-credit-risk women applicants were less successful in securing business loans than men with similar credit risk.
Encouraging More Female Entrepreneurship
Women have proven that business ownership is no longer a male-dominated endeavor, and in many ways, women are better suited to franchising than men. Here are three things we can all do to boost even more female entrepreneurship:
1. Encourage and support your friends, daughters, wives and other women to consider franchising as a proven path to successful business ownership.
2. Help break down societal norms that still leave women often chiefly accountable for household and family duties in addition to career responsibilities.
3. Push for equal access to start-up capital, and find and promote lending institutions in your community that bolsters financing for women-owned businesses.
Business ownership has long been a path to wealth creation. As more women enter franchising, I predict we will see the gender income gap begin to close. Women will build larger businesses and penetrate many of the more male-dominated industries. Franchising will experience much growth over the next decade, and who better to lead that charge than women business owners? It’s going to be exciting to watch.