Articles
Written by Claudia Cahalane in contribution to the ACTION Project website
Could your social enterprise do wonders elsewhere? Perhaps it’s time to franchise…
Success rates for franchises are much higher than business start ups, so with political support and a growing buzz around social enterprises, could now be the time to start franchising the good work you do?
How can a successful social enterprise help many, many more people than it already does, relatively easily? The option of social franchising or replication offers this opportunity. And, across the social enterprise sector, there’s a rising interest in this kind of expansion.
The early stages of replicating do, of course, require some time and effort, and usually some outside support from a lawyer. But, once a business has the experience of working with at least one franchisee or replication, the road to creating several more can be fairly smooth. And, the enterprise’s social impact grows and grows.
According to Franchise Works, 90% of franchise businesses are still running five years after set up. Whereas, for non-franchise business start ups, the success rate is well-documented as being much lower – at around 50%.
Wales and Ireland have no shortage of impressive social enterprise business models that get right to the heart of communities, offering jobs, training, regeneration, recycling and a whole lot more. And, they are ripe for replication.
John Bennett, former head of award-winning Cardiff-based social enterprise franchise Pack-IT, and now head of the Welsh Social Enterprise Coalition, says: “Within the sector there is definitely the feeling that replication could be a good way of moving things forward, to create more social good, quickly.”
While at distribution company Pack-IT, which employs people who are disadvantaged in the labour market, such as those with different learning abilities, Bennett franchised the business.
The first new outlet opened in Hereford in 2004. Two more have opened since, one in Scotland and the other in Melbourne, Australia.
He says that while a number of social business don’t feel confident enough to go on the replication journey, it was really worthwhile for Pack-IT and the various communities it now operates in.
“We knew franchising would mean a wider social impact for Pack-IT and more job opportunities and we had a solid business model, so we decided to go for it,” says Bennett. “It seemed a good way to expand without losing that close-knit feeling you get from being within the community you serving.”
The business currently has three franchisees which all share and update the same operations’ manual. They pay a fee each year to the central Pack-IT office and receive support in return.
Cost savings
Founders of companies who franchise or replicate say it is normally much cheaper – perhaps around half the original cost, at most – for a franchisee to set up, compared to what it cost the main to start the business in the first place.
Vintage Vision, for example, which started with one shop selling vintage clothes in Abergavenny just under two years ago, has recently replicated the shop in Blaenavon, and there have been substantial savings the second time around.
“Having opened one shop, we knew exactly what was needed for the second and could put everything in place more quickly, without some of the trial and error we had with things like insurance, publicity, point-of-sale goods, display material and stock control the first time. I’d estimate a 40% time saving,” says Amanda Peters, one of the Vintage Vision’s directors.
Green-Works, an enterprise which refurbishes office furniture from big companies to sell on to charities, schools, small businesses and individuals at a low price, now has five franchisees.
“Our franchisees save at least 50%, if not a lot more, of the start up costs that we incurred when we set up our first depot in London,” says founder, Colin Crooks. “We do practically all the sales and marketing centrally as well, so while they do pay a franchise fee, they save a lot this way,” he adds.
Interestingly Crooks, and others in the sector have seen that banks can be more willing to lend to those opening franchises or replicating businesses, because they have a proven business model to work with.
Political support is also strong in all parts of the country. Nick Temple, consultant and author of the Social Enterprise Coalition’s recently (April 2011) published ‘The Social Franchising Manual’, says there is a definite upsurge in curiosity about social franchising inside and outside the sector.
Political support
“There does seem to be growing interest at the moment, as can be seen, for example, by SEC’s research. I’ve also witnesses some political support. David Cameron has mentioned franchising good ideas in his speeches a couple of times,” says Temple.
There are a range of support organisations that can offer help to potential franchisees, often for free/pro-bono. And, while social enterprises still often struggle to find cash, a little can be unearthed, with some clever investigation, to get franchisees on their way.
For example, Dublin-based Fledglings, a fast-growing childcare social franchise has ably brought in support and money from a variety of places.
Founder Dara Hogan, who was previously on the board of highly successful commercial franchise SPAR, is happy that so many outsiders have supported his dream to have a plethora of early years education franchisees across Ireland.
“The Department of Children and Youth Affairs shared our vision – as did Social Entrepreneurs Ireland,” says Hogan. “Both have renewed our funding up to 2013. We were also delighted to win significant funding from the National Early Years Access Initiative to train our teams in the Fledglings Early Years Manual.”
Additionally, Fledglings is receiving pro-bono help from a leading law firm, and has had research support from six MBA students at Trinity.
Replicating the great social businesses that we have across the UK and Ireland is perhaps the fastest way to achieve change in our communities. If you think you might be ready to branch out, why not start putting the feelers out now?
Tips
- Make sure your business is in good working order before you think about franchising.
- Think about what kind of franchising/replication structure might work for you (see research from SEC, particularly Nick Temple’s report), you can replicate very simply by just giving your business model away, or you can keep it all centrally controlled.
- Consider franchising your particular model to existing social businesses. Green-Works for example, looks to partners in the Community Recycling Network to run a ‘Green-Works’ strand in addition to the usual business.
- Check out Franchise Works, a pilot scheme/organisation run by the Shaftesbury Partnership. It seeks to attract and mentor people interested in exploring franchising as a way into self employment and has developed a fund to help meet the start-up costs for successful candidates.
Potential pull outs:
According to Franchise Works, 90% of franchise businesses are still running five years after set up. Whereas, for non-franchise business start ups, the success rate is well-documented as being much lower – at around 50%.
