African American restaurateurs’ financing behaviors: A grounded theory approach

Abstract

Although the National Restaurant Association advocates for African American restaurant ownership, and with known financing difficulties for African American entrepreneurs, there is a dearth of African American restaurant financing research. The present study explores strategies that African American restaurateurs can use to secure financing in the conventional capital market with a qualitative design. Using the grounded theory methodology, the researchers conducted in-depth interviews with five African American- and five non-Hispanic White-restaurateurs, allowing a comparative perspective. A banker was also interviewed for data triangulation. After open, axial, and theoretical coding, some findings include that Black restaurateurs often start establishing their first social network outside their socioeconomic network in college. They also accumulate economic and social capital while working in the restaurant industry and tap into their college and professional social capital for professional advisors during their startup process. This research also proposes the African American Startup Framework consisting of eight themes and 23 subthemes. The framework identifies how the group can leverage cultural (e.g., knowledge, skills, education), social (e.g., social networks, group memberships, access to influential people), and economic capital (e.g., financial capital) to solve financing issues. The contextual impact of racial membership on financing success is also examined. The findings provide theoretical implications to advance our understanding of African American restaurateur financing behaviors and practical implications for both African American restaurateurs and the banking industry.