Alpha Phi Alpha Fraternity Inc., the country's oldest black fraternity, has entered into a $30 million deal with Church's Chicken to acquire franchises in inner city neighborhoods and create a new pool of African-American business owners.
The Baltimore-based fraternity will acquire at least one franchise and help its members buy 49 others over the next five years. The agreement is part of an initiative by the fraternity to develop neglected neighborhoods and open the door to business opportunities for minorities.
"We [African-Americans] don't own many franchises now because of roadblocks," said Alpha General President Harry E. Johnson Sr. "We're trying to erase some of those roadblocks."
The deal is the first business venture for the fraternity, which recently created a separate foundation for economic development projects.
Although the fraternity and its members expect to eventually run franchises in 17 cities around the country, Johnson said he hopes to open the first in the Baltimore or Washington area in the next nine months.
As part of the deal, Church's reduced by 50 percent the initial fees applicants must put down as a deposit to apply for a franchise. The company will also handle the real estate acquisitions and land deals in most cases. The entire cost of a franchise ranges from $600,000 to $800,000.
Church's officials said the agreement will help the company franchise with its expansion strategy.
Many of its restaurants, including those in Baltimore, closed after the privately owned company was bought by Popeye's in the late 1980s. In 1992, Atlanta-based AFC Enterprises bought both chicken companies and is now aggressively trying to improve Church's standing in the industry.
"In addition to expanding in areas where we already have restaurants, we're also looking at places where we used to have restaurants and going back and bringing that brand to some of those areas," said Hannibal Myers, Church's worldwide development officer.
The company concentrates many of its restaurants in urban, older neighborhoods, the very places the Alphas want to help revitalize. The chain has 1,500 restaurants worldwide. "We're really excited about this relationship," Myers said. "It's a good match for Church's, as a company that is trying to grow, and Alpha Phi Alpha, which is trying to provide other opportunities for its members."
The Small Business Administration is also a partner in the venture and will pre-qualify people who complete a one-week training class on how to run a fast-food business.
Alpha Phi Alpha will receive a quarter of a percent of the net proceeds from each franchise, which will help finance economic development initiatives.
Alpha and Church's officials said the prestige of the fraternity helped to seal the deal.
Alpha Phi Alpha is an international fraternal organization with 175,000 members. Founded in 1906 at Cornell University in Ithaca, N.Y., its members past and present include influential people such as civil rights leader Martin Luther King Jr., Supreme Court Justice Thurgood Marshall and scholar Cornel West.
The fraternity plan to open stores in two phases, first targeting Baltimore, Washington, Cleveland, Columbus and Cincinnati. It will then expand to other cities, such as Tampa, Milwaukee and St. Louis.
Johnson said many members have already shown interest. Several members from one of the fraternity's regional chapters have agreed to help a recent college graduate buy a franchise, he said.
"We're not trying to sell pie in the sky," Johnson said. "We're trying to sell entrepreneurship, ownership and job creation."
Some in the industry said the deal was a wise one for Church's, the No. 4 chicken restaurant company, which is trying to gain market share in the industry.
"I think it's somewhat clever," said Dennis Lombardi, executive vice president of Technomic Inc., a Chicago-based food service consulting firm. "It's a very positive, creative, win-win situation. If it's implemented correctly, the company gets new stores and new franchises and it helps with the diversity of the business. The fraternity gets into the franchise business."