Paving a New Path with a Social Franchise Strategy

By Ben Litalien | June 27, 2007

As an article by Colleen DeBaise in this week's Wall Street Journal explores, some nonprofits, including Share Our Strength, are beginning to look at national franchises as a way to earn income:

""Social franchising is part of a larger and increasing phenomenon of earned income by nonprofits," says James E. Austin, emeritus professor of business administration at Harvard Business School in Boston..."It has the attraction, from the nonprofits' standpoint, of providing infrastructure, product, administrative systems, and a proven marketplace…""

Leadership takes on many forms, but one of the most essential applications is in paving a new path, especially when it comes to the financial health of the nonprofit sector. Most need not apply, and they are better off waiting for the social pioneers to cut a clear path before venturing too far off the existing approaches to generating unrestricted income. Developing a Social Franchise Strategy is indeed a new, unproven approach that will take a pioneering effort to firm up, yet it holds great promise for the sector in reducing risk, providing funding diversity and generating new exposure, volunteers and donors for nonprofit organizations.

The concept of leveraging key nonprofit assets into a franchise to create a competitive advantage is novel and less than 100 organizations have taken the leap -- with widely diverse results. It takes a disciplined, systematic approach to forge a meaningful relationship between a nonprofit and a franchise company to ensure that there are mutual benefits without undue risk to the nonprofit's mission. For Share Our Strength, which is preparing to launch its first WineStyles shop in Washington, DC, this disciplined approach has been key:

"Executives at WineStyles, which has 110 stores nationwide, were at first skeptical about allowing a nonprofit agency to buy and operate one of their stores. "This is not a gratis type of thing," says Robert Spuck, chief executive of WineStyles, who went forward with the deal after making sure Share Our Strength could handle the $25,000 franchise fee and other costs associated with opening a store...

"Just like any other franchisee, if they don't have the proper training and if they don't implement the system the way it was designed, they won't be successful," he says. "If you want to be one, you have to act like one.""

As Social Franchise Ventures takes a few brave nonprofit leaders down the path, we are learning as much as we are delivering, yet a few key thoughts have emerged:

-- Nonprofits have rarely, if ever, looked at their full compliment of assets from the prospective of the franchise community and in virtually ever case there are multiple opportunities to create a clear competitive advantage

--Considering launching a franchise is much more exciting than actually opening and operating the business, especially when it gets down to investing the limited capital available

--Building organizational consensus is a formidable challenge facing many would be social pioneers

Only the carefully documented results from the Share Our Strength/WineStyles relationship and others like it can provide the backdrop for nonprofit leadership in general, as well as the franchise community at large, to consider this innovative approach.