Diversity Not Top Priority for Small Firms : Business: A formal policy is an unaffordable luxury, owners say.

Although small businesses account for the state’s major share of new job growth, most are not required to have formal affirmative action programs or even to tell the government the composition of their work force.

Only employers with 50 or more workers must submit annual reports on work force race and gender to the federal Equal Employment Opportunity Commission. And among small firms, only those with government contracts come under affirmative action requirements.

For the majority of small businesses, a formal affirmative action policy is an unaffordable luxury in the daily hustle to stay afloat, according to owners. In interviews with 133 small and large companies, The Times found that more than a third of the larger businesses reported having affirmative action programs while only one in eight small businesses reported having them.

“It just has never been an issue for us,” said Bill Pechstedt, owner of Sanford-Lussier Inc., a Huntington Park wood-molding shop with 34 employees.

Demographics, not affirmative action, determine the composition of Pechstedt’s work force, he said. The neighborhood where the shop is located is Latino, and the applicants coming in through the front door or from the woodworkers union are Latinos. Not surprisingly, most of his employees are Latinos, Pechstedt said.

Like many small-business owners, Pechstedt said he works 12-hour days, including Saturdays and often Sundays. He does everything--hiring, bookkeeping, maintenance and supervision--and has no time to venture off-site to recruit minorities and women, as do large companies with human resources officers whose sole duty is equal employment.

“I don’t know anybody in my business who bases their hiring decisions on ethnic origins,” he added. “It’s based on work history and how the guy impresses you.”

Jim Weidman, a spokesman for the National Federation of Independent Businesses, a 60,000-member national association of small-business owners, said affirmative action is low on the list of priorities for many small businesses.

“When they’re looking to hire someone, they’re looking in their own houses, next door, people they went to school with or people who live in the local area,” Weidman said. The composition of the small-business work force is extremely dependent on the business locale or the race, ethnicity and gender of the owner, he said.

The 500,000 franchise businesses nationwide employ more than 7 million workers. But there are relatively few minority owners, even though many franchises are located in minority neighborhoods and women and minorities make up a significant portion of the employees.

Of 371 franchising companies surveyed in 1993 by Women in Franchising, blacks owned only 2.6% of franchise operations, Latinos 2.2%, Native Americans 0.1% and Asians 5.4%. A survey of 242 franchising companies in 1994 found that only 9.7% of franchises were solely woman-owned.

Franchising is predominantly a “white, suburban phenomenon,” said Susan Kezios, founder of Women in Franchising Inc., a Chicago-based training and education firm.

One reason is that franchise chain executives sometimes resist affirmative action or outreach efforts, she said.

“I literally had someone say to me, ‘There’s enough white guys to sell [franchises] to,’ ” Kezios said.

Another reason, she said, is that minorities and women find it hard to get loans for large start-up costs, which typically range from $50,000 to $300,000.

Myron Cooks, 32, an African American who owns Rent A Wreck car rental franchises in Sun Valley and Pasadena, said his start-up costs came to $500,000. He was able to muster the money only with creative financing and help from the parent corporation.

Although Rent A Wreck was supportive, Cooks said, he ran into difficulty when he tried to relocate one of his stores this year to a predominantly white area. He said landlords appeared reluctant to rent to him, which he attributed not to his type of business, as they claimed, but to his race.

Now, using white real estate brokers and a consultant, Cooks is close to reaching a deal on a new location.