Can Social Enterprise Scale Through Franchising?

The benefits of franchising are well understood – the franchisor bears lower capital expenditure to expand, yet derives revenue through the franchise, the franchisee does not have to invest time and energy in building a brand or a captive market, moreover he inherits the parent company’s best practices, systems and technology. The model is fairly standard and widely used in the corporate world – from car rental agencies, to fast food, to supermarkets.

One of the benefits that the model brings with it is the ability to replicate fast, and to scale. This fits perfectly into the challenge several social enterprises face. So can the franchising model be used to replicate and scale social enterprise, and therefore create a greater impact?

This is the topic of a publication by the Association of German Foundations, “Social Franchising: A Way to Systematic Replication to Increase Social Impact.”

At the outset, the report begins by building a clear benefit for social franchising. The opening section talks about the benefits of not reinventing the wheel, and the need for scale. Social enterprises it says, have an “obligation” to scale, seeing that many people are still not reached by existing projects and that social needs remain high. Often non-profits succumb to the idea of developing something new, rather than perfecting and scaling what they know already works. The imperative to scale therefore is high. And this is the case that the report builds.

Further, the report takes a closer look into how replication can be achieved, including franchising. It goes on to define some of the characteristics of commercial franchising, as well as drawing a distinction between the former and social franchising.

The third part of the report enumerates the opportunities and challenges for social franchising. The principal opportunities include: faster and more cost-effective replication of non-profit programs, improvement through systemic transfer of know-how and ongoing learning, financial gains and benefits in network synergies.

Of course, franchising is not without its risks for social enterprises. Some risks documented in the report include: risk of changing initial mission, risk of negative reputation, difficulties of monitoring and evaluation, difficulties in standardization, and competition over fundraising.

Further, the report highlights a framework for implementing social franchising, including suggestions to make models sustainable.

The report draws from several case studies including the work of the Annapurna Conservation Area Project in Nepal, Reach a program of Freedom from Hunger and Aflatoun.  Its depth and detail provide for a good guide to any social venture looking to expand and grow via the franchising model.

Read the entire report here.