By Joyce Mazero | Franchising.com
As noted in my previous article (Social Impact Investing Shows Up in International Social Franchise Programs), there are many examples of how social impact investment has facilitated the use of the social franchise model - permitting social/micro-franchisors and franchisees to scale their businesses, allowing them to employ local residents, serve more customers, and improve the economic health of local communities in an international context.
In the U.S., there is compelling evidence of interested parties having examined the feasibility of using the business format franchise model in low-income communities on a "for-profit basis" to 1) reduce the leakage of employment and buying power to surrounding communities, while 2) building an economically beneficial business presence in the local market. In this article, I report on some of the case studies, evaluations, and programs supporting this premise.
There is sufficient evidence of franchises that can fill the gap between existing businesses and the lack of healthy food, retail, fitness, and basic business services in demand in underserved local markets. There also are examples of franchisors who have unilaterally implemented programs facilitating the training and qualifying of employees interested in becoming franchisees.
In the U.S., there appears to be little reported and accessible evidence of how low-income communities, impact investors, universities, government agencies, and franchisors have worked together in markets to bring trained and qualified local entrepreneurs the opportunity to operate franchised businesses in the areas so in need of attention. More specifically, there appears to be a lack of evidence of 1) how finding, paying for, and maintaining resources to support the training and eventual qualifying of a local entrepreneur can be allocated and shared among the franchisor, community developers, impact investors, universities, and government agencies; and 2) how that revenue can be allocated and shared among the same parties in a fully "for-profit" environment.
I hope the examples in this article will act as a catalyst to cause further engagement in building a shared network of resources to foster and scale programs that result in trained, qualified local operators in low-income and under-developed markets in the U.S.
Boston's Neighborhood Restaurant Initiative
In an effort to revitalize low-income or commercial areas, the City of Boston launched the Neighborhood Restaurant Initiative in 2004. The initiative, which included locally owned franchised businesses, focused primarily on developing full-service sit-down restaurants in neighborhoods lacking access to them.
The initiative, which provided resources for developing new and expanding full-service restaurants included technical assistance (creating business plans, choosing a location, marketing); permitting and licensing; design assistance (signage, logos, and storefronts); facade improvement grants; liaisons to city departments; financing (direct assistance and referrals); and workshops for potential restaurant entrepreneurs. The initiative also provided additional funding as a junior loan for qualifying businesses.
Chick-fil-A's employee development programs
Despite remaining closed on Sundays and facing national public relations controversies in the past few years, Chick-fil-A has continued to scale successfully, exhibiting tremendous market share growth in the limited-service chicken segment. Chick-fil-A is known to focus on a long-term, holistic approach to supporting employees that includes core values and team member training and development.
The company's Remarkable Futures Scholarship program directs a portion of its proceeds to annual scholarships for employees to attend colleges and universities. Every employee that qualifies receives a pre-determined amount of scholarship money. Since the program's inception in 1973, Chick-fil-A has given more than $34 million in scholarship money to 34,000 employee team members.
Chick-fil-A also offers the Jumpstart Experience leadership development program, an intensive job opportunity and personal development program that gives employees a "jump start" in their business careers. This program requires that participants have graduated from a four-year college and have exhibited at least two years of leadership experience. Each participant undergoes a demanding, 30-month program that includes hands-on experience in running all facets of a company restaurant, individual mentorship opportunities, and life-planning assistance.
B. Good: How a smaller brand can offer local economic benefits
B. Good is a regional all-natural burger and sandwich franchise restaurant network operating in Massachusetts, Maine, New Hampshire, New Jersey, Rhode Island, North Carolina, and Connecticut. Its menu features locally sourced seasonal ingredients for all of its beef and produce. The franchise's costs do not appear to be significantly higher than regular, non-locally sourced fast food restaurants because the company uses whole food products and prepares the products on site. The company also focuses on building networks with a growing list of local farmers and plugging them directly into their supply chain. To maintain a unique list of ingredients and products in the face of obvious sourcing challenges, B. Good has a limited menu with a reduced number of offerings, compared with other fast food restaurants. Its flexible menu highlights ingredients unique to each franchisee's local market. While B. Good does not have the geographic presence or numbers of a Chick-fil-A, the company is interesting because of its flexibility, and provides a good example of how franchises, although in a smaller network, can offer the same local economic benefits as independently owned businesses and larger franchised chains.
Domino's "Deliver the Dream Program"
Domino's "Deliver the Dream" program provides financial support and technical assistance to Domino's minority team members who desire to become franchisees. The program identifies and develops high-performing, elite minority team members regardless of where they began with the company. Domino's also partners with outside resources to facilitate financial assistance for selected members. This partnership has allowed participants to start franchises with a significantly reduced franchise fee. Domino's offers several other programs that serve as feeders for this program, including optional training programs for employees interested in becoming managers; and the Franchise Management School for employees interested in becoming franchisees and operating managers.
Next time: Social impact investing in Georgia's Hollowell Parkway Corridor and the public-private partnerships making it happen.
Joyce Mazero, a shareholder with Polsinelli PC, a law firm with more than 825 attorneys in 21 offices, is co-chair of its Global Franchise and Supply Network Practice. Contact her at 214-661-5521 or firstname.lastname@example.org.
The International Franchise Expo comes to the Javits Center in New York, NY from May 31 through June 2, 2018! Enjoy free registration courtesy of MSA Worldwide through this link: free Expo registration (use promo code MSA when registering).
On Thursday May 31, Michael H. Seid, Managing Director of MSA Worldwide, will host a presentation on how the use of commercial franchise techniques is being used in social franchising to improve the delivery of social services and products at the Base of the Pyramid.
Three social franchise initiatives will be explored: CFWshops in Kenya, Woman360 in Ghana, and Ohio State University's Global Water Initiative in Tanzania. In addition, Mr. Seid will explore why companies like KFC are expanding in Kenya and throughout Africa. All social franchise or commercial franchise questions the audience may have will be addressed.
To attend this presentation, please RSVP directly to:
For a full schedule of the 2018 International Franchising Expo, visit www.ifeinfo.com.www.ifeinfo.com/
Many IFA members have expressed interest in social franchising, the application of the franchise model towards humanitarian ends. IFA's 2018 Convention offers a number of opportunities to learn about social franchising and begin to engage.
1. IFA Franchising in the Social Sector Task Force Meeting
10 am to Noon, Saturday, February 10th
Phoenix Convention Center Room North 227-B-C
2. How Social Franchises Are Addressing Complex Problems in the Developing World
8:30 to 10 am, Sunday, February 11th
Phoenix Convention Center Room North 123
This interactive panel and audience discussion will examine commercial franchise approaches to complex issues in the developing world. The issues faced by Ohio State University's Global Water Institute in reestablishing well water, local delivery and seasonality issues in Tanzania are unique and difficult. Franchising instead of a classic NGO model was chosen because of the promise of consistent quality and sustainability. The structure of the Global Water Institute (GWI) franchise offering and approach will be examined. In this session, the audience, based on their experience in commercial franchising will be challenged to look at the issues GWI is facing and recommend changes to their adopted strategy.
Moderator: Michael Seid, CFE, Managing Partner, MSA Worldwide
Speaker: Marty Kress, Executive Director, Global Water Institute, The Ohio State University
Speaker: Mark Vanase, Director, Field Operations, ServiceMaster Restore
3. Business Solutions Roundtable- Social Franchising: Serving the Base of the Pyramid
8:00 to 9:45 am, Tuesday, February 13th
Phoenix Convention Center, Room West 301 B-D
Facilitators: Michael Seid, CFE, CFW Shops & Ferenz Feher, Feher & Feher
Check out your personal agenda and register today at https://www.franchise.org/convention.
Visit the IFA Social Sector Task Force's site to learn more: http://www.socialsectorfranchising.org/about.html
What is social franchising?
Commercial franchising and social franchising are variations on the same basic strategy for expanding a business. They differ in just two ways:
» The type and purpose of the products and services offered by the business being franchised
» The profile of the target customer
Social franchised businesses, like those operated by traditional NGOs (nongovernmental organizations) are primarily developed to offer products and services that people need - not simply want - such as healthcare, safe drinking water, sanitation, clean energy, and education. These are social enterprises whose creation is targeted to achieve goals such as those set in the 2030 Sustainable Development Goals established by the United Nations (https://sustainabledevelopment.un.org/sdgs).
With the exception of the different profile of the targeted consumer, social sector franchises and commercial franchises are quite similar. In contrast to the customer who walks into a McDonald's or a Marriott, the consumer targeted by social franchise systems often can't afford to pay the entire cost of the goods and services they need. Because of that, social franchisors are usually unable to generate the royalty and other revenue and fees necessary to independently sustain the overall business.
Being independently sustainable is the hallmark of commercial franchising. That is the significant difference between social and commercial franchisors.
IFA Social Sector Task Force Chair Addresses Students at Ohio State University: The 411 on Social Franchising – External Advisory Board Member Speaks With Fisher MBA Students
Recently, a member of our external advisory board, Michael Seid, international franchising consultant, came to speak to a group of Fisher MBA students on campus. Well over 40 students attended the lecture, on a topic of great interest in the business world: franchising. Franchising is defined as licensing the right to use a firm’s business model and brand for a prescribed period of time, and Seid is definitely an expert in the practice. The co-author of Franchising For Dummies (co-written with the late Dave Thomas, founder of Wendy’s), as well as co-author of a book released this year, Franchise Management for Dummies, he has spent much of his life working in the world of franchising as a consultant.
At Fisher, Seid shared his insight and expertise on various aspects of franchising, but one topic that many of the students that attended the session enjoyed very much was social franchising. Social franchising takes a new spin on the model you might recognize from the fast-food world. The difference is that instead of businesses providing just consumer products or services, social franchise systems provide public-oriented services like health care or water in an entrepreneurship/non-profit hybrid model that can be replicated just like a restaurant chain.
In particular, Seid discussed a group of birthing centers that he and his partners have helped to launch in Ghana. The centers use a hub-and-spoke model where locally deployed clinics are owned and operated by nurses or midwives, and focus on prenatal care, but a master franchiser operates centrally-located hub clinics to which mothers can travel to give birth or if they need more advanced care. The master franchiser also provides business support and assures strict adherence to brand standards, delivering a high-quality and standardized experience to expectant mothers. While this network of birthing centers is new and results aren’t yet in, if the social franchising model Seid and his colleagues have used for medical clinics in Kenya and Rwanda are any indication, the result will be better quality service with lower fees than government-operated centers.
“I’ve always had an interest in applying a business model into expanding free health clinics, so I found this information very useful,” said one MBA student who attended the talk. “It’s amazing how so many different people can seamlessly adapt a business model for the overall growth of the organization.”
GWI’s External Advisory Board members Michael Seid and Tom Blackstock (a former Coca Cola executive) have collaborated with Fisher faculty member Keely Croxtonand others on the GWI team (including several cohorts of Fisher MBA students) to develop a social franchising model for water services in rural parts of developing countries. The model aims to use market mechanisms to help villages keep newly established or rehabilitated water systems working for the long-term, something that has been a failure point for many water philanthropy projects in the past. A version of the model will be rolled out in two villages in Tanzania partnering with GWI to launch pilot Sustainable Village Water Systems this fall.
Building the Ecosystem of Social Sector Franchising: What Can We Learn from the Evolution of Microfinance?
Presented by Bill Maddocks, MSCED, Carsey School of Public Policy, University of New Hampshire
Access the webinar here: https://www.franchise.org/file/sstf-bill-maddocks-nov-28-17mp4
IFA Social Sector Task Force webinar presented by Dr. Fiona Wilson, University of New Hampshire
Access the webinar here:
The University of New Hampshire is delighted to invite you to the Third Annual Social Sector Franchise Innovations Roundtable (SSFIR). SSFIR is a unique invitation-only conference convening a diverse
cross-section of social sector franchise entrepreneurs, commercial franchise experts,
impact investors and donors, thought leaders, and scholars.
When: October 18-19, 2017
Where: University of New Hampshire | Durham, NH, USA
Our theme this year is “Moving from Pilots to Proven Concept: Tools, Metrics and Best
Practices for Social Sector Franchising.” The two-day roundtable will include:
Greg Hills, Managing Director FSG
Mr. Hills has over 20 years of experience advising organizations on strategy, program
design, evaluation, and operational improvement, and co-leads FSG’s global corporate
consulting practice advising multinational corporations on innovative shared value and
CSR strategies. He has published numerous influential papers and speaks regularly on
topics of shared value, CSR, collective impact, and philanthropic effectiveness. FSG is a
mission-driven consulting firm for leaders in search of large-scale, lasting social change.
Galen Welsch, Co-Founder and CEO, Jibu
Galen co-founded Jibu in 2012 and under his leadership, Jibu has quickly become a toprated
B-Corp social franchise bringing affordable drinking water access to thousands, and
creating hundreds of jobs, mostly for youth, across East Africa. Galen’s achievements at Jibu
have been recognized by BBC World, the Guardian, Fast Company, the Franchise Times, and
by Forbes 30 under 30. He serves on the advisory board of the UNH Social Sector Franchise
• Innovative Measurement Breakthroughs in Health Sector Franchising
• Building the Social Sector Franchise Ecosystem: Current Organizational Support for the
• Developing a Research Agenda and Community of Practice to Catalyze the Growth of the
Social Sector Franchise Ecosystem
Updates on our inaugural Social Sector Franchise Accelerator
• Check in on our Inaugural Living Case Studies
• Introduction of the 2017-2018 Social Sector Franchise Accelerator cohort
You will join senior practitioners (from both the social sector and the private sector), investors, and thought leaders dedicated to furthering the use of the franchise methodology in the social sector. We invite you to engage with these participants about reimagining social change, sharing your perspectives on the potential for using franchising to deliver social goods and services, and your advice for how the nascent field can achieve growth.
Learn more about the SSFIR agenda, registration and travel and hotel logistics here: https://www.unh.edu/social-innovation/ssfi/roundtable .
In 2015 the United Nations brought countries together to commit to eradicating poverty by adopting 17 sustainable development goals to achieve by 2030. The goals are ambitious and will require new approaches to solving some of the most pressing problems that plague people around the globe, even though solutions to those problems exist. How does this involve franchising? Read on!
Why disrupt the status quo?
The technology for meeting basic human needs for healthcare, nutrition, safe drinking water, sanitation, clean energy and education all exist and yet all too often, the solutions are not finding their way to the people who need them. Clearly, traditional approaches are insufficient. President Bill Clinton famously said, “Nearly every problem has been solved by someone, somewhere. The challenge of the 21st century is to find out what works and scale it up.” No-one is better equipped to meet that challenge than people who are familiar with the tools of commercial franchising.
Solving basic needs
Franchising has the potential to increase access to products and services that solve basic needs by scaling the concepts that have already been developed and proven to be both socially impactful on the community, and profitable to the business owner. Franchises of this type are often referred to as ‘social franchises’. In addition to solving social needs, social franchises, like commercial franchises, have the potential to stimulate economic growth by bringing businesses into communities, creating jobs and wealth opportunities and developing building skills that can be transferred outside of the franchise. By doing so, they can also create a middle class.
THE FRANCHISE ASSOCIATION OF SOUTH AFRICA COMMITTED TO INNOVATION AS A WAY TO TACKLE UNEMPLOYMENT AND CREATE JOBS
Reacting to the Statistician-General of Statistics SA Quarterly Labour Force Survey that shows unemployment rising to a 14-year high with 27.1% of the population without a job, the Franchise Association of South Africa (FASA) believes the franchise sector, which contributes 11.6 percent to the country’s GDP and employs over 400 000 people through its 757 franchise systems and their 35 111 franchise outlets, can play a key role in creating the necessary jobs to grow the economy through innovative venture creations.
With the gap between the unemployment rate envisaged by the National Development Plan (NDP) and the current rate widening and with Government’s goal of 5 million jobs by 2020 fading fast, the only solution for real economic growth to happen, is if 90% of South Africa’s jobs come from small business.
Says Tony Da Fonseca, FASA’s Chairman for 2017/2018, “Solutions to the employment challenge need to be tackled as a matter of urgency. We as the franchise community have the business format expertise to assist in the establishment of new franchises in a variety of sectors not yet franchised – be it in agriculture, manufacturing or even in government’s social services. But we need to mobilise business and industry leaders, government and civil society to play a part in freeing up economic regulations and find creative solutions to allow entrepreneurship to flourish.”
It has been proved time and again that small and medium enterprises (SME’s) are the backbone of every economy around the world. According to Vera Valasis, Executive Director of FASA, who represents South African at the World Franchise Council, “small businesses are creating two thirds of the jobs in developed countries and a large percentage of those small businesses are through the franchising business format. There is no reason why South Africa cannot drive the same growth through franchising that countries such as Brazil, China and India have shown.”
Many of the Franchise Association’s members are already exploring new ways to empower small businesses and entrepreneurs in bridging inequality, creating prosperity and employment.
According to Anita Du Toit, Director at Franchising Plus, franchise consultants who have pioneered the piloting of social franchise projects, there should be more programmes with a focus on skills development and that certain skills could be turned into sustainable micro franchises, thereby helping these franchisees to earn a living and removing them from the job seeking market.
“We have always said that painters, tilers and such trades could be franchised under the umbrella of a big retailer or paint manufacturer. This would solve the problem of consumer perceptions of the credibility of independent contractors while also ensuring a central referral system, ongoing training and support and helping such tradesmen to earn a good living as a small business operator. The focus should move from job creation to the creation of sustainable small businesses. Franchising offers a mechanism to enable this.”
Kobus Oosthuizen, former Chairman of FASA and MD of SA Franchise Warehouse, has, for the past few years worked closely with government on several initiatives to stimulate entrepreneurship, skills transfer and job creation. In 2014, an initiative from the Jobs Fund, and in conjunction with Business Partners, resulted in just under R100 million advanced and more than 600 jobs to be created by the end of 2017.
The second round of an emerging franchisor initiative spearheaded by the Department of Small Business Development’s Micro Franchisor Development Project will see the number of businesses replicated total twelve. “There is no doubt that these projects” says Kobus Oosthuizen, “will go a long way to enhancing the reputation of franchising as an enterprise development mechanism, whilst playing a valuable role in reviving township economies, creating new businesses, passing on important skills and more importantly, creating much needed jobs.”
Tony Da Fonseca, MD of the OBC Group and Chairman of the Franchise Association of South Africa (FASA), believes that the franchise sector is perfectly poised to take the lead in transforming the business landscape and make an even bigger contribution to entrepreneurship, skills transfer and job creation.
“As a group of progressive franchise entrepreneurs, historically and against the odds of sanctions, we created a franchise sector that today boasts over 90% home-grown concepts. Sustainable economic transformation can become a reality only if the public and the private sector come together to optimise limited resources and utilise available opportunities to best effect,” says Da Fonseca.
The franchise community will gather at the annual FASA Convention sponsored by Absa to network with industry stalwarts who will be sharing their leadership styles and how they are tackling the challenges in franchising.
The Convention takes place on Thursday 29th June at the Kyalami Grand Prix Convention Centre from 08h00 to 16h45 ahead of the Franchise Business Festival which takes place from the 30th June to the 2ndJuly – showcasing franchise and business opportunities. For more information visit www.fasa.co.za or email email@example.com
Posts on our blog are contributed by a team of professionals dedicated to developing valuable resources for the Social Sector Franchising community.