Black-owned business growth triples national rate
By Chris Levister –
When a devastating flood forced Freddie Mae’s Southern Cooking in Fontana to close last summer, the family promptly made lemonade out of lemons.
After less than a year of operation, they launched a second location in the prestigious Victoria Gardens’ Food Hall in Rancho Cucamonga.
“Freddie Mae’s has been a twenty year vision in our family. Southern hospitality comes naturally for us. And many of our family and friends loved our cooking so much, that after dinner, would often say, ‘Who made the Mac’?” says the restaurant’s namesake Freddie Mae Fort.
“So when the flood occurred it was a no brainer to accelerate plans to open a second location.” Fort says the Fontana location is set to reopen in the spring.
The popular ‘healthy soul food’ eatery known for a its sweet southern lemonade, “healthy” mouth watering macaroni and cheese and its trademark “ooeygooey” dreamy sweet potato pie is an example of what the Census Bureau, calls one of the fastest-growing segments of the U.S. economy.
According to the Census Bureau’s “Survey of Business Owners: Black-Owned Businesses: 2007,” the receipts produced by Black businesses increased 55.1 percent to $137.5 billion. The survey, conducted by the Census every five years, provides in-depth information about Black firms’ sales, receipts, and payroll.
The number of businesses owned by Black men and women grew at more than triple the national rate in recent years said Thomas Mesenbourg, deputy director of the Census Bureau, in a written statement, a trend that may be linked to a long-stagnating job market.
In 2007, the number of Black-owned businesses jumped to 1.9 million, a 60.5% increase from 2002. By comparison, the number of U.S. businesses overall rose by just 18% during the same period.
The government agency, which conducts the survey every five years, defines Black-owned businesses as firms in which Blacks own 51% or more of the equity, interest or stock of the business.
Many African-Americans likely turned to entrepreneurship in the years covered in the study because good-paying jobs were difficult to come by, says Marc Morial, president and chief executive of the National Urban League, a civilrights group headquartered in New York.
“The unemployment rate in the Black community never got back down to where it was before the recession in 2001,” he says. “So you have a bit of entrepreneurship by necessity.”
Morial added that many African-Americans also recognized the potential to become financially secure through self-employment.
“There's an economic independent streak, particularly among emerging generations in the Black community,” he says. “Building a business gives greater satisfaction, and cushions them from the shock of working for a place and then finding themselves out of a job because of economic down cycles.”
Morial says the findings suggest that one way for the U.S. economy to create more jobs today would be for investors to boost funding to growing Black-owned firms. “These are an incredibly fertile place,” he says. “Hedge funds, private equity and the venture-fund community need to focus on these businesses.”
Of the 1.9 million Black-owned businesses in 2007, 106,824 had paid employees, an increase of 13.0 percent from 2002. These businesses employed 921,032 people, an increase of 22.2 percent; their payrolls totaled $23.9 billion, an increase of 36.3 percent. Receipts from Blackowned employer businesses totaled $98.9 billion, an increase of 50.2 percent from 2002.
These non-employer businesses' receipts totaled $38.6 billion, an increase of 69.0 percent. The number of Black-owned businesses with receipts of $1 million or more increased by 35.4 percent to 14,507 between 2002 and 2007.
The Great Recession's impact
Of course, the economy has changed a lot since the latest survey was conducted in 2007. In the wake of the Great Recession, many small firms have seen demand sink and sales drop, in some cases forcing the business to close.
At the same time, layoffs have inspired many African-Americans to leave the corporate world to start businesses, said Alan Hughes, editorial director of business at Black Enterprise magazine.
Because of these competing trends, “it is tough to say at this point whether you see a net gain, loss or a wash,” in Black-owned businesses since 2007, said Hughes.
Also during the recession, credit dried up, hitting Black-owned businesses particularly hard, said Lucy Reuben, a professor at Duke University's Fuqua School of Business.
“There is no lack of ideas and talent,” said Reuben. But she said, “lack of capital continues to be a very, very difficult challenge for Black business growth.”
But a huge gap remains between the gross receipts of Black-owned businesses and those of whiteowned businesses. Other racial disparities persist.
Ivonne Cunarro, with the U.S. Commerce Department’s Minority Business Development Agency, says there also is still an entrepreneurial parity gap between African- Americans’ growing share of the population and their ownership of just 7 percent of U.S. businesses.
She says the true economic potential of the African-American business community is still unrealized.
Studies suggest Black business owners have less family business experience and lower levels of education and startup capital than White businesses owners, which contributes to their companies’ lower performance.
A 2007 study found Black-owned businesses also are more strongly represented in less-successful industries, like personal services such as barbershops, beauty salons, home health care and housekeeping.
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