Social Franchising

The idea of social franchising has its roots in commercial franchising but, only up to the point of using similar techniques. In terms of the objective and goals to be achieved, the social and commercial forms of franchising are quite different.

In social franchising, profit is not the sole objective of running the business; profit or money is only a means to ensure that a franchise runs smoothly. Commercial franchise, just like any other business entity is profit oriented. This very approach sets apart the commercial franchising business from social franchising.

Many of us are not aware of the concept of social franchising. However, there are many companies already operating in this sector. Some of these examples are World Scout Foundation, World Organization of the Scout Movement, Greenstar, Bluestar, ARV Care, New Start and DiMPA Network.

Greenstar was the first organization which popularized the idea of social form of franchising on a large-scale. Health care is one field where social franchising has been used extensively.

A social franchise follows the same business model as that of commercial franchise. The franchiser prepares the necessary guidelines and policy to run the business. Activity of building up a network of franchisees follows next.

Franchisees are offered with the franchise business plan and rights to run the business in specified areas.

The decision regarding how many and which types of services can be offered by franchisees also is taken while handing over the charge. The franchiser provides franchisees with necessary training, specifications about quality standards, operating methods, etc.

There are many different formats implemented to run social franchising businesses. The typical and commonly used format is the one, in which business takes place just like any other for-profit franchise. However, earning profit from the business is given a second preference.

The profit earned through business is used for social causes. Another format used is similar to that of non-profit organizations; franchisee fee is not collected in this business format. The techniques and core principles used in this format are however, same as that of other franchising businesses. Finally, there is the subsidized social franchising model.

The subsidy received by these social franchises is used to offer services at a lower cost. There are slight differences in the functioning of above mentioned businesses which need to be understood properly.

The main difference between a social and commercial franchise is that their target groups are different. Commercial franchises target customers while social franchises focus on beneficiaries. The social franchises are in most cases, dependent on financial help from external sources. Obtaining funding from donors is a common practice in the working of social franchises.

Social franchising is a highly beneficial practice from the point of view of scaling up an idea which helps in finding solutions to social problems. Replication of this idea is implemented more effectively through social form of franchising in comparison to the traditional businesses.

Another benefit of using this business model is that 'returns to scale' (effects of rise in production) increase considerably. The increase in returns to scale takes place due to concentrated efforts which otherwise get dispersed while functioning independently.

The social franchising business model is the best example of how costs can be reduced. Replication of best practices, reducing transaction costs and other factors help in keeping expenses to a minimum.

Social franchising as a business model can attain success only if the franchiser and franchisees are ready to bear some loss, at least in the beginning. This type of franchising activity is basically a social endeavor. One should therefore, be ready for initial hitches and glitches.

Over time, a social franchise can start functioning as a successful business model with minimum amount of loss and mutual understanding between the franchiser and franchisees can take this model to great heights of success.