Schlotzsky’s Franchise Partner Charles Reed was recently recognized by The Street as one of five black-owned business owners who have found success. This clip features Charles. For the complete list of business owners, click here.
NEW YORK (MainStreet) — Along with Martin Luther King Jr.’s fight for social justice came goals of economic justice, and the famed civil rights leader would be pleased to learn that
today black-owned small businesses are one of the fastest-growing segments in the small business sector.
From 2002 to 2007, the number of black-owned businesses rose by 60%, to 1.9 million – more than tripling the national rate of 18% to become approximately 7% of all small businesses, according to the most recent data available by the U.S. Census Bureau’s Survey of Business Owners.
In 2007, nearly four in 10 black-owned businesses operated in health care and social assistance as well as in the repair, maintenance, personal and laundry services sectors.
Black-owned businesses, like the rest, took a hit as a result of the recession. But while obtaining capital is still hard for all small businesses, blacks have an even tougher time gaining financing.
Data from 2009 research by the Kauffman Foundation reveal “dramatic” differences in the capital injections of black-owned start-ups compared with white-owned new businesses.
The median personal wealth for whites is 11 times higher than that of blacks, according to the survey, which cited census data. Since personal savings are typically used as collateral or to be invested directly into the business, “low levels of black personal wealth may be detrimental to securing capital,” the research found, adding that black-owned start-ups “experience higher loan denial probabilities, pay higher interest rates than white-owned businesses and have low levels of start-up capital.”
The survey tracked nearly 5,000 businesses founded in 2004 over their early years of operation.
“Having less access to capital not just at start-up, but also in subsequent years, could have a detrimental effect on black-owned firms’ long-term performance,” says Robert Litan, vice president of Research and Policy at the foundation.
“Anything that you deal with in business … is exacerbated for the minority community,” says Daryl Williams, CEO of the Urban Entrepreneur Partnership, a Kauffman affiliate. “If there is a lack of access to capital for general population, it’s exponentially higher for the minority population.”
As we celebrate King and his work, it’s good to know there are plenty of black entrepreneurs who have bucked the trend. Here are five business owners who had a dream and made it come true:
2. Charles Reed
Owner of five Schlotzsky’s in Texas
Lesson: Listen to your gut.
Charles Reed got his entrepreneurial kick-start in 1993 when he decided to leave his job in HR at a large oil company and buy with his wife a Schlotzsky’ssandwich shop in Plano, Texas.
Nearly 20 years later, the couple owns five Schlotzsky’s, all in Texas.
“I was working for a major corporation and I was just looking for a change,” Reed says. He decided on franchising; he wanted something that was local, but had opportunity for expansion.
But being your own boss comes with pros and cons. “I have a lot of responsibility,” Reed says. “That being said, I do have a fair amount of opportunity to arrange my day in a way that fits the things that I am doing.”
“The most important thing is it allowed me to provide appropriate jobs for people, and that’s important to me,” he adds.
As a minority, though, Reed acknowledges that finding capital has been a challenge. “For me the challenge has always been, where do you get the cash to grow and [to be able to] build the appropriate banking relationships — that’s always been an issue for a small business, and blacks in particular,” he says.
“If you have the appropriate training, the appropriate amount of capital and the understanding of how much time and work is involved in it, then I think that the opportunity will be there,” he says. “Learn as much as you can about the endeavor you are going into and recognize that whatever you think the cost is, add another 15% to 20% to it and more time. In addition, never eat your seed money, and spend a whole lot less than you make.”
But probably the biggest lesson Reed has learned is to follow your instincts, even when others contradict you. “Instincts are all of your experiences and training. If it tells you contrary to what someone is trying to tell you to do — stick by your guns and be willing go down the path that others may not,” he says.
For instance, two years after Reed bought his first store, he saw an opportunity to build a location on a busy highway in Plano. At the time, it didn’t have much else going on around it. Schlotzsky’s corporate didn’t think the site he had chosen would be very successful. Reed went ahead with the store opening anyway. Today, he says, the area surrounding the location is fully developed, with more than 150,000 cars that pass by on a daily basis. And his Schlotzsky’s gets to reap those customer benefits.
“I’m local and I believe I have better local knowledge,” he says. “I did it anyway and it did fine.”
Source: The Street (Click for the list of all five business owners)