Social franchising is the use of a commercial franchising approach to replicate and share proven model to achieve greater social impact.
Social franchising is a method of expansion for social enterprises. It works in a similar way to commercial franchising and enables a not for profit organisation to scale and expand the reach of the operations and provide the same services in new markets and locations working with a local social franchisee partner.
What is Social Franchising?
Social franchising is a relatively new concept to both the franchise sector and the field of social enterprise. Social franchise models have been developed in healthcare, family planning, recycling operations, ethical health and beauty, workspaces, volunteering placements and non-profit advisory centres, among a huge variety of other projects.
Social franchising is primarily a replication and expansion strategy. It allows individual franchisees the flexibility to ensure their franchise is successful in its own area, and that funding doesn’t have to be centralised, especially in the case of large scale or international social franchises.
In the spectrum of growth and replication strategies, social franchising sits fairly centrally, when compared to the tightly controlled wholly owned expansion models or the flexible dissemination and open source strategies. Social franchising allows both parties flexibility within their role in the franchise model, while also ensuring the goals, brand and resources from the parent company are fully realised by the franchisees.
As a relatively new form of expansion for social enterprises, there can be a huge amount of variation in how a social franchise sets up their system and model. Some franchises will choose to be highly centralised and maintain a high level of control over their franchisees, while others will take a less active role in the day to day running of the actual franchises, and allow individual franchisees more flexibility in how they provide their services on a day to day basis.
The level of flexibility will depend on a variety of factors, including the complexity of the core model, the strength of the brand identity, where the majority of funding for the activities comes from, the risk level, the extent to which knowledge and learning processes need to be shared exactly, and the potential for exploiting economies of scale, among a wide variety of other factors.
What Can Social Franchising Do?
Franchising can be an excellent method of growth for social enterprises as it allows organisations to expand in a lower risk model, whilst still scaling the operation in a socially conscious way, that aligns with the core mission, values and identity as a brand.
Social franchising allows organisations to:
- Increase their operations and social impact, without creating a tall organisational hierarchy, which in traditional growth structures can create distance between the operational side of the organisation and the socially beneficial work they do.
- Start new branches (franchises) of the business quickly and easily, as the core operational model is already proven to be successful. In a franchise system, expansion is primarily a case of replicating the proven model in a new location.
- Tailor the proven model as and when required by the new market, due to the fact that ownership and operations are locally based, and the franchisee has enough control to make informed suggestions about their franchise unit.
- Achieve the benefits of being part of a larger organisation, while still maintaining local independence and flexibility, such as joint purchasing and bidding, policy credibility, effective communications, economies of scale and funding opportunities etc.
- Share successful models with franchisees in a way that combines the organisation’s social and financial goals of having significant social impact, while also remaining financially sustainable.
- Work through genuine partnerships between franchisors and franchisees, and for mutual benefit for both parties, under a common identity.
- Encourage entrepreneurship among franchisees and their communities by devolving power and giving responsibility to franchisees.
How Is Social Franchising Different From Commercial Franchising?
The primary difference between social and commercial franchising is that in a social franchise, there is the need for a socially beneficial mission, as well as the need to achieve financial objectives such as sustainability. In commercial franchising, the franchisee takes on the franchise with a key objective to make a profit, in social franchises the social impact is the main driver. There is also a need for the social goals of the franchisor and franchisee to be aligned. In most social franchises the social objectives take precedence over the financial ones, and many are non-profit businesses, with any and all profits being re-invested into the work of the organisation.
In a commercial franchise, franchisees are incentivised to be successful by making more profit and meeting goals so that they are able to achieve financial success. In the social franchise system, this is generally not the case and so social franchises need to be able to meet both the social objectives and financial requirements of the project or organization.
Why Use A Social Franchise Model?
A social franchise model is so appealing to many social enterprises as it can achieve financial sustainability, longevity and effective expansion for the organisation and its mission, without compromising on the socially beneficial principles of the brand. Social franchising can enable strong and financially stable growth, whilst also sharing knowledge, learning and information to help increase the social impact of the organisation. This stands in contrast to traditional company-owned growth, where the financial responsibilities generally remain with the central organization, or open-source and dissemination methods where the social impact is significant, but without any form of ongoing revenue generated.
This link between the financial requirements and impact objectives and social principles of an organisation makes social franchising a very exciting model of expansion, that offers real potential to help grow the social enterprise sector on a large scale.
There’s a growing body of evidence that indicates that access to funding can be easier in a social franchise network as it enables the network members (social franchisees) to access new funding opportunities as a group whilst providing the funders with a robust mechanism for due diligence and feedback aligned with the opportunity to fund a model that is proven in relation to the social impact that it can achieve.
Is Social Franchising Right For Your Organisation?
While social franchising can be a highly effective model of expansion, there are limitations and restrictions to when social franchising should be used as a viable expansion method.
As with commercial franchising, the model has to be proven and some investment is required to begin moving a social enterprise into a successful social franchise. The organisation should have been running for at least twelve months, but ideally for around three years, with development capital to be able to take on the costs of setting up a new franchise, which are estimated to be between £15,000 and £30,000. Many existing social franchises have successfully attracted funding or donor support to finance the development costs.
To successfully begin a new franchise, an organisation must have:
- A proven track record in their sector, having made recognised social impact under their company and brand name.
- Demand or need for the products or services provided must be identifiable in other geographical areas, be it from end-users, policymakers, funders and, ideally, potential franchisees.
- The organisation must be able to set up a system that offers real financial and social value for both the franchisor and the franchisee.
- An easily replicable and understood impact model. Creating a model that can be quickly learned by new franchisees with easily transferable knowledge and methods, and has the capability to be replicated in a variety of different locales.
- Set systems, operations and procedures in place that ensure the day-to-day operations of the business are consistent and can be clearly understood by new franchisees.
- Commitment to movement into a social franchise model from the staff, team and board of the organisation.
- A financial situation that is sustainable and stable, with the ability to comfortably take on the costs of setting up a franchise.
- A strong organisational brand and identity that allows customers and franchisees to recognise and become loyal to the brand.
How Does A Business Become A Social Franchise?
At The Franchise Company, we are passionate about the potential that social franchising has, and have helped a variety of social enterprises enter the franchise model.
When approaching a new social franchise, we first assess the suitability of the model. Not all social enterprises will be suitable for franchising, so we can’t always recommend it as the most viable course of action. Franchising, especially social franchising, is a long term endeavour, and we take this into account from the very start to ensure your business is as successful as it can be, both at the start of the franchise model and as the enterprise grows over time.
We then spend time working closely with you to understand your mission, and how your organisation works within the sphere of social enterprise. This allows us to create a comprehensive plan, detailing how best to move forward once we’ve taken into account everything that makes your organisation tick. We’ll take an in-depth look at your organisation’s finances, operations and marketing to get a sense of what makes your business work. When assessing social franchises for suitability, taking into account the relationship between profitability and social impact is vital to planning a successful franchise model, and will heavily affect the type of franchise model that is planned.
In social franchise models with higher levels of risk, such as where errors by franchisees can have significant impact on the business as a whole, a franchise model will be planned that has a higher level of centralised control. More controlled and centralised models are also required for enterprises that rely on economies of scale to maintain financial balance, have a particularly complex or multifaceted business model, and businesses that have a highly standardised method of operations that requires centralised sharing of information, for example. Businesses with investors also tend to require a more centralised franchise model, as the franchisor will need to provide evidence for the success of operations across franchises, whereas self-funding franchisees can have a more flexible, independent franchise model.
Through our close analysis of the companies we work for, we can then design a bespoke franchise model, designed to maximise the impact of the enterprise and keep your mission at the heart of the model, while also ensuring its long-term financial success, and the longevity of the franchise.
Once the planning and modelling of the franchise has been carried out and we have established that your enterprise is viable for a franchise model, we will move onto documentation and the development of the franchise.
The documentation of the franchise ensures that franchisees, funders, investors and users in the areas your franchise works understand exactly who you are and what you do. This process includes the creation of:
- The franchise operations manual, which cements how the franchises will function from day to day.
- A legally-binding franchise agreement between the franchisor and franchisees, giving both parties security and a strong understanding of the roles and relationships that is required from them in the franchise system.
- The brand and associated materials of the franchise. This is usually trademarked and then licensed out to franchisees to use as part of the franchise agreement.
- The marketing budget of the franchise. In commercial franchises, this budget is usually centralised, but depending on the format of operations and level of control in a social franchise, this can vary from completely centralised to almost entirely independent for franchisees.
- The training and support programme from the franchisor to their franchisees, including the training and support given both at the start-up of the process and on an ongoing basis.
- The learning culture and standards of the franchise, including channels for franchisees to request more training, feedback to the franchisor, and give opportunities for innovation and new business practices.
- A territory analysis, showing potential expansion of the franchise, including the level of demand for the social franchise model in different locations.
- A system of quality assurance, identifying standards and monitoring processes that have to be upheld for both franchisors and franchisees.
- The franchise fee structure, setting out plainly the fees for both parties, both during the initial start-up of the franchise and on an ongoing basis.
These documents allow us to help establish the day-to-day processes of the franchise from the very beginning of the franchising process. The importance of high-quality documents when beginning a social franchise cannot be understated, as they help to make clear the responsibilities of both the franchisor and franchisee from the very start of the process, setting expectations and responsibilities for both parties and preventing confusion or conflict going forward.
We’ll also help create marketing and recruitment documents for your franchise, to promote your business and social message to potential franchisees and lay the foundations for successful relationships, and the development of the cause. These are the materials that tell potential franchisees about your organisation’s cause and the driving forces behind what you do. Having franchisees that are passionate about the cause and mission of the franchise is vital to the success of a social franchise, and having effective marketing and recruitment helps to make this part of the franchise process a success.
Piloting the Franchise
Once the development work is completed we generally recommend that the social franchise model is piloted with 1 - 3 franchisees, to help create a strong network of dedicated franchisees before expanding.
While in commercial franchises, the franchisees are often an individual, with a social franchise, it is more normal to have an organisation as a franchisee. Whether an individual or an organisation, the pilot franchisees must share the values and objectives of the franchisor - both financially and socially - in order for the franchise to be successful, and this is an important part of the initial franchisee recruitment process. We’ll create a feedback loop to help identify any issues and create a positive and open relationship between franchisees and franchisors in this initial pilot period.
Once the successful pilot period is over, we can help you as you begin to expand and improve the reach of your social franchise. We can help provide support to you and your franchisees as the reach of the organisation grows, in the form of franchisee and staff training protocols, digital marketing support, mentoring and coaching support, and continued help with franchisee recruitment processes.
Why Choose The Franchise Company?
The Franchise Company founder, Julie Waites, is one of the UK’s expert voices on the subject of social franchising, and is passionate about the impact social franchising can have for both the social enterprise sector and the franchising industry as a whole. Since forming The Franchise Company in 1991, Julie has gone on to help establish a wide variety of both social and commercial franchises across a range of sectors.
All of our consultants at The Franchise Company are passionate about helping social enterprises expand their operations and do good in the world. Our years of experience mean you can be sure your organisation is in good hands.
We have extensive experience in international franchising as well as social franchising, so no matter how or where you’re looking to expand your social enterprise, we understand all of the potential issues and pitfalls social franchises may face, and can give you honest, straightforward and informed advice to help your organisation navigate them.
If you have a social enterprise and want to expand your operation in a franchise model, contact one of our trusted advisors today and see how we can help make your social franchise a success.
If you would like to arrange an initial discussion about social franchising please contact Julie Waites directly on email@example.com.
- Growth in social impact in line with organisation’s mission
- Reduces need for central funding
- Reduces hierarchy within larger organisations
- Shares best practice
- Allows for local ownership, flexibility and tailoring to local circumstances
- Achieves benefits of national organisation (joint purchasing, bidding, policy, communications, etc.) but within a local setting.
- Shares successful models
- Works through genuine partnerships and mutual benefit, under a common identity
- Devolves power and encourages entrepreneurship
- Encourages innovation
- Encourages a wider range of individuals to become stakeholders
Learn More about Social Franchising
We’ve worked on social franchise projects with social enterprises across a range of sectors including mental health, children’s services, domiciliary care, training and education.
We offer a wide range of consultancy services for third sector organisations considering expansion through a franchise model. If you’d like to have an initial discussion about this please contact Julie Waites on firstname.lastname@example.org or 07778 743517.Contact us