Franchising offers a proven system, an established brand, and collective buying power — at the cost of royalties, operational standards, and adherence to a franchisor's directives. For Black franchisees, an additional layer applies: documented racial discrimination in site assignment, financing support, and inspection frequency that has produced federal civil rights lawsuits.
How Franchising Works
A franchise is a licensed arrangement in which the
The franchise model exists across more than 700,000 businesses in the United States, employing over 8 million people. It spans fast food, hospitality, fitness, business services, healthcare, and retail. The structural appeal is real: a franchisee buys into a system that has been tested, refined, and branded — reducing the experimentation cost that new businesses typically absorb. Supply chains are negotiated collectively. Training infrastructure is provided. The learning curve is compressed.
The cost structure matters. Area development agreements grant a franchisee the right to open multiple units within a defined territory over a set timeline — typically the pathway to multi-unit franchising, which is where the economics of the franchise model substantially improve. Single-unit franchisees operate at thin margins; multi-unit operators build scale advantages that change the financial profile of the entire operation.
The Access Argument
For prospective entrepreneurs without the technical depth or capital reserves to build a business from scratch, franchising offers a documented path: lower startup risk, established brand recognition, operational training, and collective supply chain pricing. These are genuine structural advantages, not marketing copy.
The Black franchise tradition runs deeper than is commonly recognized. It does not begin with a franchisee buying into a White-owned brand. Annie Turnbo Malone's Poro College network — 75,000 independent beauty agents selling her products across three continents by 1926 — is one of the earliest documented franchise systems in American business history, predating the McDonald's model by decades. Lovie Yancey built Fatburger from a single restaurant into a national brand. Victor Green's Green Book operated through a network of correspondent agents who verified and submitted listings, functioning as a distributed franchise system for safe travel. The Black franchisor tradition is not a footnote — it is the origin of the model for several industries.
The Discrimination Record
Federal civil rights law — specifically 42 U.S.C. § 1981 — explicitly prohibits racial discrimination in franchise contracts. The law exists because the discrimination it prohibits has been documented, litigated, and, in multiple cases, settled.
In 2020, 52 Black former McDonald's franchisees filed a federal lawsuit alleging systematic discrimination: they were steered toward lower-sales, higher-cost urban locations; subjected to more frequent inspections than white franchisees; given shorter windows for required renovations; and offered less financial support during transitions. The number of Black McDonald's operators had declined from nearly 400 in 1998 to under 200 at the time of filing — a more than 50 percent reduction while the overall franchise system grew. The suit was settled in 2021.
Racial steering — the practice of directing Black franchisees away from suburban or higher-revenue locations toward lower-performing urban sites — is the most documented discrimination pattern. It operates through discretionary site approval processes that are, by design, difficult to challenge. A Black franchisee who is told a specific location has been 'committed to another operator' has limited recourse without documentation. The entrepreneurs in this vertical who navigated or are navigating these environments did so with that knowledge. Enter informed.
Key Terms
Profiles — Franchising
Homer B. Roberts
In 1919, he became one of the first — possibly the first — Black automobile dealers in the United States, operating in Kansas City as a franchisee of the Hupmobile brand.
Lovie Yancey
She started with a three-stool hamburger stand in South Los Angeles in 1947 — two years before McDonald's opened its first franchise and seven years before Ray Kroc joined the company. She built Fatburger. You know Fatburger.
Valerie Daniels-Carter
She runs 132 restaurants, employs 4,500 people, and operates the largest female-owned food-service franchise organization in the United States — and you have almost certainly never heard her name.
Shaquille Rashaun O'Neal
He turned brand recognition into a franchise portfolio that would make most private equity firms take notice -- and he did it one store at a time.
Decision game
Featured decision-based scenario
Franchising
Homer B. Roberts — Hupmobile
A branching, decision-based scenario from the historical record.
Tools & Exhibits
Tools
Exhibits