Chapter 17

A World of Good with Social Franchising

IN THIS CHAPTER

check Getting a sense of what social franchising is

check Focusing on the base of the pyramid (BOP)

check Overcoming social franchising challenges

check Checking out CFWshops, a fine example of a social franchise

check Finding resources for social franchises

Let’s start with the basics. 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

MSA Worldwide, the franchise consulting firm your co-author Michael Seid founded in 1987, has established a practice group to work with social franchisors, NGOs, social investors, and donors (www.msaworldwide.com). According to Julie McBride, senior consultant, social franchising for MSA Worldwide, “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 — to live healthy and productive lives, including healthcare, safe drinking water, sanitation, clean energy, and education.”

These are businesses whose creation is targeted to achieve performance goals such as those set in the 2030 Sustainable Development Goals established by the United Nations (https://sustainabledevelopment.un.org/sdgs). “These are businesses whose customer base includes primarily the underserved segments of our global society,” McBride says.

With the exception of the different profile of the targeted consumer, social businesses and commercial businesses are quite similar. In contrast to the customer who walks into a McDonald’s or a Marriott or Dat Dog in New Orleans, 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.

remember Being independently sustainable is the hallmark of commercial franchising. That is the significant difference between social and commercial franchisors.

Franchising is a way to achieve a social impact on a large scale because franchising achieves three key things that other methods of distribution don’t:

  1. It standardizes what people do so that when they perform services they do it in a manner that achieves the result sought — such as effective quality care in the case of primary care.
  2. Because it entails a standardized format, there is something to replicate. And scaling doesn’t just mean opening more locations but replicating a standardized unit.
  3. If the first two are accomplished, then economies of scale may be exploited to bring down costs while standards continue to be met.

We stress these three things because the root problem in poor countries is that many things we might find as substandard in an industrialized world are acceptable because they are unavailable or in short supply. Unlike in rich countries, where standards drive the quality of most things in commerce, it is often the mere availability of the product and service that drives decisions at the base of the pyramid (BOP). The compliance with standards is what delivers the most social impact.

Social franchisors — although capable of achieving and replicating consistent brand standards and sharing in all the other performance and economic benefits found in commercial franchising — require subsidies at multiple levels to offset the cost of serving the difficult to reach and low-income customers (see Chapter 6). But in every other material way, commercial and social franchising are basically the same. In both commercial and social franchise systems, the following are true:

  • The franchisor licenses to a franchisee its brand, system, and methods of doing business.
  • The franchisee operates and manages their independently owned business to the brand standards of the franchisor.
  • The end-user customer benefits from the consistency and quality standards set and enforced by the franchisor.
  • The business owner (franchisee) is selected and supported by the franchise system.
  • As an independently owned and managed business, the franchisee earns a living and creates equity for themselves and for their families.
  • The franchise system creates jobs in the communities it serves.
  • The franchise system creates consumer brand awareness, and its capability to be effective and economically efficient makes it competitive against the existing competition.
  • Even though the franchise system requires a funding source to overcome poverty at the consumer level — and may also require subsidies to support franchisee development — at a foundational level, just as with any well-structured commercial franchise, social franchises are designed, developed, and managed to achieve financial sustainability.

It is the endemic economic difference in the markets they serve that creates the challenge for social franchisors. Instead of living off of the royalty and other continuing fees paid by franchisees from the local sale of their products and services, the franchise system requires substantial economic support from donors or other economic sponsors until it can create critical mass and achieve internal sustainability. Even though social franchisors have the capability of achieving their goals more effectively than a traditional NGO, the economic realities of the market they share are the same.

remember An NGO is a not-for-profit organization that seeks to provide a variety of beneficial products and services and other humanitarian functions. An NGO is independent from any federal or other government organization.

Social franchising, like commercial franchising, follows a bottom-up business strategy where the local level business performance and the consumer are of paramount importance. Traditional NGOs — while also seeking to achieve socially beneficial ends by increasing access to products and services across a range of socially oriented industries — are more often top-down enterprises and don’t have the same commercial focus, nor do they generally apply the same commercial methodologies or discipline. Still, both systems target markets that are generally underserved with populations in low-, medium-, and high-income countries around the globe. The primary focus of each is solving many basic societal needs for the world’s population found at the so-called base or BOP.

BOP: The Base of the Pyramid

Just as commercial franchising is an alternative growth and distribution strategy in traditional markets, social franchising is an alternative strategy to consider at the BOP. In many important ways, though, the tools and structures found in social franchises can be adopted by traditional NGOs to improve their performance, just as commercial franchising techniques can be used to improve the performance of other for-profit enterprises.

The term BOP refers to the people who live at the bottom of the wealth pyramid, who are in extreme poverty. Although the majority of the world’s people living at the base of the pyramid today reside in developing countries, the term was originally used by Franklin Roosevelt to describe a segment of society in the Unites States at the height of the Great Depression in 1932 (www.presidency.ucsb.edu/ws/?pid=88408).

The similarities between the developing world today and the Unites States in 1932 are striking. In a radio address, Roosevelt spoke to the needs of the people who had lost their jobs, were poor and without hope. He spoke of the farmers unable to sell their crops at a price that equaled their costs and he laid out his plan for rebuilding the economy. How this relates to social franchising is the solution that he proposed to this challenge. He called not for charity to support the poor but proposed an economic plan to rebuild the U.S. economy “from the bottom up.” President Roosevelt said in a speech called “The Forgotten Man”:

“In my calm judgment, the Nation faces today a more grave emergency than in 1917. It is said that Napoleon lost the battle of Waterloo because he forgot his infantry — he staked too much upon the more spectacular but less substantial cavalry. The present administration in Washington provides a close parallel. It has either forgotten or it does not want to remember the infantry of our economic army. These unhappy times call for the building of plans that rest upon the forgotten, the unorganized but the indispensable units of economic power for plans like those of 1917 that build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid.”

remember It is estimated that there are approximately 7.4 billion people in the world today, with 4 billion living on less than $8.25 per day. The BOP refers to the ones who survive on less than $2.50 per day. Half the world’s wealth is controlled by 1 percent of the world’s population, mainly in developed countries. The remaining 99 percent of the world’s population shares the other half.

When plotted on a graph, the economic dispersion resembles a pyramid with the extreme poor being the largest segment, making up the base of the pyramid. The goal of developing economic opportunity at the BOP is not to transfer the wealth of the 1 percent to the 99 percent, because that is an illogical, unsustainable, and disproven method to achieve economic improvement. The goal of social franchising is instead the natural expansion of the economy in these markets sufficient to create sustainable and widespread opportunities for local and natural wealth creation.

Commercial franchising has already shown its capability to be a key ingredient in developing economic opportunity and transforming inner city communities domestically. Because of brand standards and the structures in a franchise that ensure the ability of a franchise to achieve and uniformly maintain those standards, economic opportunity and local wealth is created. In addition to the creation of local jobs, the products and services change the human dynamics in neighborhoods because the same consumer opportunities available in affluent neighborhoods are now available in their neighborhood.

Both NGOs and social franchisors may be able to deliver the same products and services to a community at the base of the pyramid. That is, both methods share a common mission. However, franchising, as a method of distribution, has essential attributes that are lacking in traditional NGOs:

To be successful, a social franchisor needs to focus on the essential social mission it shares with NGOs, but it needs to deliver those goals using the business and legal standards and practices found in commercial franchising. The structures and practices we have discussed in this book that are necessary for successful commercial franchises are exactly the same as those needed for successful social franchisors.

According to the United Nations’ 2014 Millennium Development Goals (MDG) Gap Task Force Report, “Essential medicines are available, on average, in only 55 percent of facilities in the public sector and 66 percent in the private sector (in selected developing countries).” In its 2010 Countdown to 2015 report, MDG estimated the following:

To put these facts in context, more than 17,000 children under the age of five die from preventable causes each day, and scaling affordable, effective, and accessible healthcare is essential to solving this critical problem.

Scott Hillstrom, founder of CFWshops, a social franchise network of primary care medical clinics headquartered in Nairobi, Kenya, advocates the use of the franchise model as a means to incentivize providers to deliver effective, quality care in places where legal regulations are not enforced. He says, “Franchising is a way to set standards, to scale, and to achieve economies of scale. CFWshops serves 500,000 people per year — half in clinics and half in community health education activities — at a cost of only $250,000 to fund the franchisor.”

Franchising’s goals include by necessity sustainability. In a commercial setting, the consumer has the economic resources to purchase the products and services offered, and many of those purchases are of non-essentials. In a social setting, the consumer most often lacks the resources to purchase the products and services offered, and their purchase decisions are more basic. They are looking to purchase the essentials: medicines and medical care, food, clean water, and so on. Until the underlying economies at the base of the pyramid change, this consumer reality will not change. However, unlike the delivery of charity through a traditional NGO, social franchising’s mission to create local wealth can be a significant ingredient in the necessary overall economic improvement in the markets.

The Challenges for Social Franchising

For social businesses to be part of the solution, they need to be scalable, affordable, effective, sustainable, and accessible to the poor. The most common methods employed by NGOs in delivering services to the extreme poor too often fall short.

We should remember that given the enormous population at the BOP, even with extreme poverty, it should be a significant consumer market for companies to sell their products to. However, according to “Reality Check at the Bottom of the Pyramid” by Erik Simanis (Harvard Business Review, https://hbr.org/2012/06/reality-check-at-the-bottom-of-the-pyramid), it is not because the “low price, low margin, high volume” requires “an impractical penetration rate of the target market — 30 percent or more of all consumers in an area.”

However according to the same report, “The model works well if two conditions are met: One, the company can leverage an existing infrastructure that serves wealthier customers to offer a product or service to poor consumers; and, two, the consumer already knows how to buy and use the offering.”

tip The goal of social franchising is to target an underserved population living in extreme poverty by increasing access to products and services that “consumers already know how to buy and use.”

The products and services currently offered through social franchising now are focused on safe drinking water, food, sanitation, healthcare, education, and clean energy — the products and services the consumer needs to survive. Ultimately, the products and services that become available through franchising will expand as the economic conditions in the markets improve, and will then include those the consumer may simply want.

Social franchising has the potential for solving the first hurdle identified by Erik Simanis — the lack of an existing infrastructure by effectively creating that infrastructure through supported local ownership and management. In effectively addressing this concern, franchising’s inherent advantage over other methods of downstream distribution used currently at the BOP is its ability to effectively develop, scale, and support a local infrastructure necessary to distribute the products and services at a lower cost at higher consumer standards, while also leveraging alternative methods of distribution. Franchising must always be viewed, whether in a commercial or social setting, as part of the mix of available methods of expansion and downstream distribution of products and services. Franchising works best for enterprises when it is viewed as an alternative method of distribution and not viewed as the sole method of distribution a company employs.

Social franchising provides opportunities for local franchisees that have limited access to capital and other resources and provides them with the support needed to create local businesses and succeed. Because of the methods and techniques used in commercial franchising, social franchising’s business model is capable of low cost and rapid growth while at the same time maintaining consistent standards and achieving economies of scale. What social franchising is, is the use of the methodologies found in commercial franchising to scale businesses and solve both the economic and social problems for those that live at the Base of the Pyramid (BOP).

CFWshops: An Example of a Social Franchise System

Scott Hillstrom is the founder of Child and Family Wellness Shops (CFWshops for short), a medical clinic social franchise in East Africa. Scott was awarded the Entrepreneur of the Year Award by the International Franchise Association in 2014 for his work in developing social franchises. Scott is a lawyer by training and an entrepreneur through experience. His adoption of social franchising was not by chance but arose out of his curiosity of trying to understand why sustainable solutions were easily available in the commercial world but seemingly unworkable in the social sector.

How CFWshops got started

CFWshops, headquartered in Nairobi, Kenya, is a network of locally owned franchised medical clinics providing authentic drugs and quality medical care to people at the base of the pyramid. Since it was established in 2000, CFWshops in Kenya has served more than 5 million patients.

Scott had become frustrated with the inefficiencies, high costs, and low standards of NGOs in delivering medical services in the emerging markets. He was enamored by brands like McDonald’s and Subway that could provide their customers, regardless of the market, the same quality French-fries and sandwiches and do so in a way that replicated the brand’s culture and quality at each location. His vision was that if commercial franchising could accomplish that with food, he could do it with medicine and other services in Africa.

The barrier faced by CFWshops is that without a consumer base with the ready ability to pay for its products and services, and the lack of a workable social service net to pay for those services (think insurance, Medicare, and Medicaid in the United States), it was still highly reliant on third-party funding like any other NGO.

The CFWshops model incorporates the key elements of commercial franchising, including brand standards, selection of franchisees, training, support, marketing, critical mass, and (essential for the markets and consumers it serves) a supply chain that combines the buying power of the network to obtain necessary quality medicines at the lowest possible cost.

Under its current approach, CFWshops is now targeting the use of emerging forms of public social service nets coming online from the government and the emergence of social investing. It is modifying its delivery system that retains the ability of its consumers to have local access to basic services but has expanded its capacity to provide a broader service offering through hub clinics that serve a wider market. The hub clinics provide local consumers with access to treatments that are not as frequently needed at the local level, that require a higher capital investment and level of professional service provider than possible previously. This hub and spoke method is an adaptation of similar methods found in commercial franchising. As discussed shortly, the hub and spoke method is also being employed elsewhere.

CFWshops expanded further by using a master-franchising approach, similar to that used in commercial franchising in Rwanda. Under the leadership of Gunther Faber, former vice president, Sub-Saharan Africa for GlaxoSmithKline, CFW licensed One Family Health to use CFW’s intellectual property for expansion into Rwanda. The combined system has more than 160 franchisee-owned-and-operated rural medical clinics today. As in a commercial franchise system, each franchisee invests in the development of their business (although the cost may be subsidized) and operates their businesses to the brand standards and with the support of the franchisor.

The CFW social franchise model is not a static one-size-fits-all model. As with commercial franchising, the model is an adaptive structure. In contrast to Kenya, in Rwanda One Family Health has been able to leverage the government’s mutual health insurance program (similar to our Medicare) that enables consumers to pay for its products and services. As discussed earlier, in Kenya the model is evolving to include a hub-and-spoke model where both middle-income and low-income patients can be served, making it more attractive to social investors. The hub-and-spoke model allows for the more effective use of higher-cost technology at the “hubs” when required by patients, and allows for easy access by consumers through a network of supported local nurse-owned franchises at the “spokes” level.

Your co-author Michael Seid, together with several past chairs of the International Franchise Association (IFA), Sid Feltenstein, Jim Amos, Steve Greenbaum, and past board member Eric McCarthey, are members of the CFWshops board and are on the executive committees of the HealthStore Foundation, its parent. Michael Seid and Sid Feltenstein also serve on the board and executive committee of One Family Health, and Michael serves as chief concept officer for both brands.

Using the hub-and-spoke and other variations of commercial franchising

This hub-and-spoke model is nothing new, radical, or untested. It is an adaptation of methods long in use in commercial franchising to leverage human and economic resources while improving system performance. MSA and Julie McBride are currently working with the PharmAccess Foundation, a global leader in healthcare finance and delivery based in The Netherlands, to develop a hub-and-spoke social franchise model in combination with a master-franchise approach for the creation of a chain of birthing centers in Ghana.

Childbirth is something relatively safe in the industrial world but is one of the leading causes of death for woman at the BOP. At the BOP, the cost of the necessary equipment and facilities for quality prenatal care and safe birth is relatively high, and there is an increasing “brain drain” as qualified medical practitioners find opportunities to earn a living in outside of their home markets.

The goal of the Woman 360 birthing center system is to establish hub birthing centers, centrally located and owned by master franchisees, that will support local and easily accessible franchised spoke clinics owned and operated by midwives and other qualified medical persons. By providing routine and locally accessible quality prenatal services to woman and enabling those women to have access to a higher level of medical care should it be needed during their pregnancies, Woman 360’s goal is to improve the level of medical care for women in the communities it serves in Ghana.

Each hub-and-spoke system will enable women, through available transportation, to give birth in modern, well-staffed, and technologically advanced birthing hospitals. The social franchise structure is designed to reduce the overall cost for women to receive quality medical care throughout their pregnancies, starting with the care they can receive at supported locally owned centers. Leveraging modern IT systems, medical records can be shared between the local clinics and hub centers, and through telemedicine and other technology, medical issues that may routinely arise can be addressed by the doctors at the hub centers and effectively treated by the franchisee and their staff at the local level. Both the hub-and-spoke system will execute to common brand standards, including location design, décor, equipment, services, supply chain, medical standards, and business focus.

Similarly, enterprises like Population Services International (PSI), a large nonprofit global health organization, use social franchising to support a variety of different social franchise brands internationally. In many markets, the PSI brands use an approach called fractional or bolt-on franchising, placing their branded medical services within existing medical facilities.

The use of fractional franchising is common in the United States and is an effective adaptation for use at the BOP.

Consider that it is common and convenient for medical services like those found in a CVS Pharmacy Minute Clinic or cosmetic counters found in department and specialty stores. These are well-accepted “bolt-on” commercial approaches. In social franchising, bolt-on franchises are being established in local pharmacies to diagnose and treat common problems like malaria in markets where qualified medical doctors are unavailable or unaffordable. Each pharmacy has franchisor-trained personnel, and each fractional franchisee is supported and held to the same quality standards as any other franchise. The different between a bolt-on franchise and a franchise like CFW is that in a bolt-on franchise, the franchisor’s brand is not used by the entire business and instead is limited to the products and services licensed by the franchisor.

remember The adaptation of methods and practices found in commercial franchising are effectively and easily being used in the social sector.

Who Are the Franchisor and Franchisee in a Social Franchise?

There is a range of business structures used in social franchising. The franchisor may be structured as a nonprofit, for-profit, or other type of structure that is specifically designed for a social enterprise, such as one of the following:

  • Social purpose corporation
  • Low-profit limited liability company (L3C)
  • Benefit corporation
  • Cooperative
  • Hybrid

There are advantages and disadvantages to the nonprofit and for-profit approaches. The key advantages of structuring the franchisor as a for-profit entity are the following:

  • Incentives between franchisor and franchisee are better aligned, which drives performance at all levels of the system.
  • The franchise system is funded as it would be in a commercial franchise from continuing fees and supply chain revenue.
  • Donor funds can be used more efficiently to create direct subsidies for the poor through insurance and other programs so that more people can access products and services delivered by the franchise.
  • As a consumer offering, there is a greater incentive for the local franchisee to meet brand standards and consumer expectations.

The key advantages of structuring the franchisor as a non-profit are as follows:

  • The franchisor uses third-party grants and donations to cover its operating costs.
  • The franchisee is subsidized, reducing some of the profit pressure on the business.

If there is a disadvantage to the nonprofit approach, it’s that the incentive for meeting brand standards and consumer needs is diminished to some extent, as the normal commercial pressures of consumers making independent choices about where they shop may also be diminished. That lack of consumer focus may introduce inverse opportunities for a lessening of brand standards. Also, because social franchising relies to a great extent on donations, any restrictions on donor funding or requirements by donors looking to make changes to the underlying system to meet their unique views of how they want the products and services they want to support delivered can have a negative impact on the social system overall. This routine requirement, often factored into donor funding, can be extremely damaging within a social franchise structure.

Ideally, over time a social franchise will deliver both social and financial returns to stakeholders (often referred to as double bottom line). Financial results are critical to the mission because it is financial success at the unit level that drives expansion to more franchisees in additional markets. Through scaling (developing sufficient locations to service the market and create an economic base for the system), the additional locations will increase the overall social impact of the franchise system.

Social franchisees, like commercial franchisees, are local business owners who operate their franchised business at a profit. Although the social mission of the business may be important to them, because the business is generally their primary source of income, the social mission is usually secondary to their profit incentive. Therefore, in selecting social franchisees, in addition to all the other requirements found in the selection of commercial franchisees, the social franchisor must ensure that the franchisee understands and accepts the critical need of the social mission. It is because of the profit incentive that many social franchises are started — not to solve a social need, but because the franchisor saw the social need as a business opportunity.

Again, because of its adaptive nature, franchisees can be single-unit or multi-unit owner operators but can also include social investors seeking to own and operate multi-unit operators and who will employ the professional staff working within the local operations.

Financing and Developmental Benchmarks for Social Franchises

Chapter 6 discusses funding for social franchisors. Social franchises use the following sources of capital to help them fulfill their missions:

Different and sometimes blended funding vehicles are used to support different growth drivers at each stage of a social franchise’s development. It is critically important that each stage of development be adequately funded in order to achieve key performance benchmarks before progressing to the next stage. The general stages of funding and developmental benchmarks are discussed in the rest of this section.

Stage one: Developing and proving the concept

During stage one, the social business concept requires development level funding generally in the form of grants to develop the concept, its infrastructure, and working capital. The donor also provides or pays for technical assistance and provides subsidies for the consumer to purchase the products or services. Stage one is used to test the viability of the concept as a social business and refine the model until it is able to deliver desired social and financial results in one location.

The proving stage is where several locations are opened and operated to fine tune the concept and prove its economic performance and consumer acceptance. Development benchmarks for this stage include the following:

  • The concept is based on well-established consumer demand in a stable and growing industry.
  • The regulatory environment in the country doesn’t impede operations.
  • The concept is well defined (brand personality, marketing, expenses, pricing, product sourcing, seasonality, location requirements, labor and training requirements, and so forth).
  • The concept is operational and is achieving earnings and impact goals.

Technical assistance required to achieve benchmarks includes developing the tactics.

Stage two: Proving the replicability of the concept

During this stage of development, the concept will be tested in additional locations and further fine-tuned to optimize performance and prove consumer acceptance and profitability in a variety of settings.

Development benchmarks include the following:

  • There is sufficient consumer demand in additional markets for the system’s products and services.
  • The consumers or third-party payer is able/willing to purchase products or services.
  • The business can be replicated (the system can be transferred and operators can achieve brand standards consistently).
  • Last-mile quality supply chain can be sustained.
  • Potential qualified franchisees for the business are willing and able to afford initial investment.
  • Potential franchisees have access to capital needed to invest in the franchise.
  • Business can achieve economic benchmarks, including return on investment (ROI), ability to support debt service, acceptable breakeven point, and providing a living wage for owner operator.
  • The franchisor management team is committed and capable of supporting franchise system.

The following technical assistance is required to achieve those benchmarks:

  • Replicating the social enterprise in one or more additional markets
  • Adapting the business to new markets
  • Assessing the expansion readiness of the business after it has been operating in additional markets
  • Determining the best replication model for the business
  • Preparing the business for expansion through the selected replication model (for example, franchising)

Stage three: Developing the franchise system

During stage three, the social franchisor’s concept and franchisor offering are designed, developed, and tested. Through mainly grants, but with some acceptable equity participation, the franchisor’s support organization is designed and developed, and local franchisees are provided with the necessary development and working capital to open locations, prove and fine-tune the franchise system. Subsidies will generally be required for local consumers.

Development benchmarks for this stage include the following:

  • The critical elements of a successful franchise system are in place — franchisee recruitment, location selection and development, operations expertise, marketing, supply chain, legal, initial and continuing support, merchandising, compliance, research, and more.
  • Growth capital for franchisor and franchisees is available and committed.
  • Expansion plan is geographically developed to enable franchisor support.

The following technical assistance is required to achieve the benchmarks:

  • Designing the franchise system (creating the franchisor entity and the strategic plan for operating an effective and sustainable franchise).
  • Producing the franchise tactical elements (preparation needed to execute strategy: operations manuals, training programs, supply chain, marketing plans, legal documents, and so on).

Stage four: Expanding locally and nationally

Once the franchise system and support requirements have been developed, consumer acceptance has been validated, and financial sustainability of locations has been proven, debt and equity investment is used to expand the social franchise system on a local or national level, with donor funding generally targeted at consumer subsidies:

  • The brand is recognizable and drives customers to the business.
  • There is sustained and growing retail demand for franchisees.
  • ROI is attractive to investors and donors.
  • Social results are strong and attractive to donors.

The following types of technical assistance are required to achieve those benchmarks:

  • Recruiting, selecting, developing, and supporting master franchisees nationally
  • Evaluating the system performance nationally
  • Refining the system to improve performance nationally

Stage five: Expanding globally

Once the franchise system has expanded locally and nationally and the franchisor has gained the necessary experience required as a franchisor, the social franchise is now ready for a more global approach to expansion. As with stage three, a blend of debt, equity, and grant capital is used to support growth.

Development benchmarks for this stage include the following:

  • The franchise system is meeting its national impact and financial goals.
  • The brand has achieved national recognition.
  • Global expansion opportunities have been evaluated, and analysis reveals opportunities for products and services in additional global markets.
  • Funding is available to expand to new global markets.
  • The number of franchisees is growing.
  • The support system including supply chain can be replicated in the additional targeted markets.
  • There are available potential franchisees in the targeted markets.
  • The system can be changed and supported based on local consumer requirements.

The following technical assistance is required to achieve benchmarks:

  • Adapting the franchise business to new global markets
  • Executing the franchise sales plan globally
  • Executing the franchise training program globally
  • Recruiting, selecting, developing, and supporting master franchisees globally
  • Evaluating the system performance globally
  • Refining the system to improve performance globally

Delivering on the Brand Promise

In any franchise system, including social franchise systems, a rigorous compliance system is required to maintain control over the delivery of the brand promise to consumers. Ensuring that franchisees have the necessary tools for local success requires that the franchisor provide them with the needed initial and continuing support, as found in commercial franchising. By tying the franchisee’s continuing license to unit performance metrics and financial sustainability, the value of the franchise deters them from behaving in ways that would risk losing franchise rights.

Every variation of commercial franchising can be applied to social franchising. Along with its clients, MSA Worldwide has developed social franchise systems using single-unit and multi-unit franchising. What social and commercial franchising have in common is that they offer franchisees a brand and consumer products and services that represent a value to consumer in products and services they not only want but that they need.

Methods like fractional or bolt-on franchising leverage established infrastructure by bolting-on the franchise system’s consumer offering to established businesses serving the consumer, whereas master franchising allows economic investors or strategic franchisees to support a local network of franchising, reducing the economic burden on the franchisor. Master and multi-unit development franchising, using a hub-and-spoke approach, also allows medical franchise systems to better utilize capital intensive equipment and deal with the professional brain drain that impacts many BOP markets. Regardless of the commercial franchising approach adapted for the social franchise, the franchisee makes an investment in developing their business, identical to commercial franchising, with the possible exception of a portion of their investment needing subsidization by the franchisor or donor.

remember Initial and continuing support, including providing a beneficial supply chain, support, and training are identical to those provided in commercial franchises.

Resources for Social Franchising

Many of the resources available to traditional NGOs are also available to social franchise systems. This section talks about a few of them.

Government funding agencies for global development

Following are the top government agencies involved in providing global aid, grants, and assistance. On each country/agency site will be information on the type of organization, development budget, focus on target countries, contact information, and more:

Private philanthropic foundations

Private foundations are playing an increasingly important role in funding international development, especially when bilateral and multilateral donor funds are restricted or restricting. Private foundations often support social enterprise development and may be interested in supporting the expansion of some of the social businesses in their portfolio through a franchise model. Following is a list that Devex (an international development news agency) compiled of the top ten private foundations according to their global development contributions. The Devex website (www.devex.com/news/top-10-philanthropic-foundations-a-primer-75508) provides more information about each of the foundations and their total global development giving.

  • Bill & Melinda Gates Foundation
  • Open Society Foundations
  • Ford Foundation
  • William and Flora Hewlett Foundation
  • Children’s Investment Fund Foundation
  • United Nations Foundation
  • John D. and Catherine T. MacArthur Foundation
  • Conrad N. Hilton Foundation
  • Rockefeller Foundation
  • Gordon and Betty Moore Foundation

Corporate philanthropists

Corporate philanthropy has been essential to the delivery of products and services to consumers at the base of the pyramid. Through grants and the access to significant human and other resources, corporate philanthropy has played an essential part of providing the necessary resources. According to a survey of Fortune 500 companies (http://fortune.com/2016/06/22/fortune-500-most-charitable-companies/), the top 20 most generous companies donated $3.5 billion in cash in 2015. Those companies are as follows:

  • Gilead Sciences
  • Walmart
  • Wells Fargo
  • Goldman Sachs Group
  • ExxonMobil
  • Chevron
  • JPMorgan Chase
  • Bank of America
  • Alphabet (Google)
  • Citigroup
  • Microsoft
  • Merck
  • Coca-Cola
  • AT&T
  • Target
  • General Mills
  • Pfizer
  • Kroger
  • PNC Financial Services
  • Morgan Stanley

Impact investors

Impact investing seeks investments that have the potential to make a significant and positively impact on society. Impact investments are made in organizations that seek to generate measurable social benefit as well as a financial return. Investors in this space are typically interested in businesses that address social issues such as health, education, poverty reduction, and environment. According to Investopedia (www.investopedia.com/articles/active-trading/090115/top-5-impact-investing-firms.asp), the top five impact investors, based on assets under management, are as follows:

  • Vital Capital Fund
  • Triodos Investment Management
  • The Reinvestment Fund
  • BlueOrchard Finances, S.A.
  • Community Reinvestment Fund, USA