Last December, Big Society Capital (BSC) asked The International Centre for Social Franchising (ICSF) to carry out research in order to better understand the social franchising marketplace in the UK. BSC’s role is to develop a strong social investment market in the UK, but the market can only be complete if it has great social organizations to invest in.
“The UK doesn’t suffer from a surfeit of large but mediocre social organizations. It suffers from a surfeit of small but great social organizations. We need more of these organizations to grow and ‘reach scale’,” states Nick O’Donohoe, Chief Executive of the BSC. “Social franchising could be part of the answer – helping the social sector scale, whilst remaining response and adaptable at a local level.”
This fall, The ICSF came back with some results, shared in a report entitled “Investing in Social Franchising”.
Social franchising can be thought as replicating a successful social venture in another location. The social venture would enable at least one independent franchisee to deliver their proven model under a license.
As with any regular franchise, the franchisee would find it easier and less risky to operate under a proven business, benefit from an established brand, and receive support from the franchisor. If the social sector uses franchising, there is potential to increase the social impact without always having to reinvent the wheel. As Bill Clinton puts it, “Nearly every problem has been solved by someone, somewhere. The challenge of the 21st century is to find what works and scale it up.”
The research indicates that there are currently 95 social franchises operating in the UK and 45 in other European countries. Just over a third of the social franchises in the UK revealed that there is no one common legal structure across the board, ranging from private limited companies to registered charities and community interest companies. Because of this, a wide variety of financing options are used. The report argues that the right balance of grants, patient (long-term) capital, and loans are vital to ensure the success of social franchises.
Historically, there have been two significant programs that have attempted to develop social franchises in the UK. The first is the Beanstalk program by the Community Action Network. The second is the Flagship Firms project operated by Social Firms UK. The Plunkett Foundation has also been involved with developing social franchises for rural businesses. While there is some traction, social franchising is still in its infancy in the UK as there are relatively few people with expertise in this area.
In order to develop the potential for social franchising in the UK, the report recommends to:
1) Develop a social franchise support body
2) Create a “pipeline” of scalable, franchisable social enterprises looking for social investment
3) Develop a social franchise investment fund
4) Bring together key stakeholders to work together on social franchising
5) Further research and policy work
One example of a social franchise success is Emmaus Communities, which offers homeless people a home, work, and the chance to rebuild their lives. It has 21 communities around the UK and several more in development.
The ICSF fears that too much time and money is wasted trying to develop solutions that have already been developed and too little is done to encourage financial sustainability and growth.
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