Social Franchising

Two scenarios:

1. You are a charity/community organisation which seeks a more sustainable means of funding. You want to establish a business which will generate profits and/or achieve social objectives and reduce dependency on grants. There is one small problem though, you don't have a business idea and even if you did, you wouldn't know where to begin to make that idea a reality.

2. You are an established social enterprise with a proven profit making business and strong brand. You want to grow as a business and maximise the social benefits but you are unsure as to how you can carry this out.

A possible solution?

Social Franchising

Similar in many respects to ordinary commercial franchising, social franchising can deliver the outcomes required in the two scenarios.

But what is it?

In effect franchising is where two parties enter into a contractual agreement in which one party (the franchisor) will give the blue-print (business model) for its successful business to the 2nd party (franchisee) which will set up a copy of that same business with the ultimate aim that both sides make a profit. Social franchising simply follows this formula and throws in the added social dimension.

In conjunction with the blue print comes a substantial support package which the prospective franchisee will utilise. This will include staff training, technical support, help with marketing/promotion of the business and access to the general know how that the franchisor has developed over the years to make their business a success.

Such support may prove particularly appealing to a charitable/community organisation which is entering the commercial world for the first time and which would otherwise be daunted by the complexities of starting a business.

But what does the franchisor get in return?

Generally in any franchise agreement the franchisee will pay an initial fee to the franchisor for the business model. The franchisee will then pay a % of turnover each year to the franchisor in return for its continued support and access. The franchisee will also invest its own money in the initial start-up which reduces the financial risk for the franchisor.

Such an arrangement offers real advantages to both parties but is not without its drawbacks.

Although the franchisee will operate the business on a day to day basis the franchisor will still exercise significant control over operations. It may dictate how services/goods are sold and marketed. It will also be keen to ensure that all activities undertaken by the franchisee do nothing to bring the brand/business into disrepute. Such control may not sit well with some prospective franchisees who would chaff at such restrictions. This will also be labour intensive for the franchisor as they must assiduously work on maintaining quality and standards.

Franchising your business model could soon become a nightmare if the franchisee destroys the painstakingly created brand through mismanagement and your lack of oversight. Therefore the franchisor must be prepared to invest the time and effort into making the franchisees operation a success.

Social franchsing is something we are likely to hear more of in the future.