Minority ownership of franchises as a way to enter the economic mainstream is soaring, while the number of minority-owned businesses organized as corporations is not, according to two Commerce Department reports released yesterday.
The number of minority-owned franchises increased 11 percent in 1977 over the previous year, according to one report. The largest number was in gasoline service station franchises.
Information collected from 1,281 respondents to a Commerce survey disclosed that 434 franchisors had a total of 4,758 minority franchisees, compared to 393 franchisors with 4,301 minority franchisees in 1976, still a small number compared to the total of 492,000 franchise establishments in the country.
Because franchisors are prohibited from keeping information on the race of their franchisees additional data was difficult to obtain, according to Andrew Kostecka, of Commerce's industry and trade Administration.
For instance, 32 of the largest franchisors representing 48,443 francisees owned outlets did not report the number of minority outlet owners, Kostecka said.
"I know they have a lot a minorities," Kostecka said. "How many, I don't know."
The figures also do not contain the number of minority-owned automobile and truck dealers and service station operators and soft drink bottlers. But the Commerce Department's office of Minority Business Enterprise estimates that there were 12,529 minority owners of gasoline service stations and 302 automobile and truck dealers, also an increase from previous year.
In addition to other information omitted, the success rate of these ventures was not listed nor the annual receipts each outlet earns.
Average sales of all franchise-owned outlets, however, was estimated at $630,000 for this year as compared with about $606,000 last year, according to the report.
Of those franchisors responding, 434 reported minority ownership of franchise outlets and 810 had no minority ownership. The remainder are not known because of bookkeeping and other problems, the report said.stThe federal government has encouraged minority ownership of franchises because the franchisor usually provides managerial training and assistance and in some cases finances the purchase of necessary equipment and arranges for property leases and loans. Franchisors also provide location analysis, advertising, merchandising, and counseling.
However, instances of fraud by some franchisors has resulted in the development of federal rules requireing franchisors to disclose certain detailed information and prohibiting them from making certain promises to prospective franchisees.
Of the 4,758 minority-owned franchise outlets, 2,065 were owned by blacks, 1,637 by Hispanics, 940 by Orientals and 135 by American Indians. More than 1,400 of the businesses were in automotive products and services, 829 in fast-food restaurants, 581 in food retailing other than convenience store and 529 in convenience stores, the report said.
Another Commerce Department report released yesterday tracing the historical progress of blacks said that recent figures show almost all back-owned firms were sole propreitorships and 2 percent were corporations.
The firms also continued to be concentrated in retail trade and other service areas. About 50 percent of black-owned firms were in the South, the report said. Figures were based on 1972 data.
About half of the black-owned banks were established from 1970 to 1975 in contrast to black-owned life insurance companies, nearly all of which were started before 1960, the report said.