According to Mr. Berelowitz, the chief executive officer and the co-founder of International Center for Social Franchising (ICSF) in London, one of the important characteristics of social franchising is its’ adoption of successful practices originating in commercial franchising. Namely, the key to a successful franchise is always recording and specifying key operating processes of a business and then transferring them onto other entrepreneurs, which can then follow your established routine and succeed in running a business of their own, by using the company’s name and the know-how. In exchange, the franchisee then pays royalty fees, marketing fees and other pre-agreed upon expenses. However, social franchises define success differently than their commercial sister. Namely, rather than putting emphasis on the retained earnings or profits, they focus on the extent of positive impact their economic activity leaves on the society. Regardless, it also needs to be noted, that even social enterprises need capital in order to survive and sustain the ability to deliver the target social impact. Thus, financial resources which are at disposal must be scrutinized at all times.

Social franchise can be financed from several sources, spanning from different governmental or European initiatives, to personal finance, contributions from family and friends, or as our “entrepreneurial business models” professor always said, the triple FFF, where his third F stands for fools. Sometimes financing can be also gained through crowdfunding or more traditional ways like bank loans. According to Berelowitz, financing can be extremely important, which is especially true when the company wants to expand the capacity of its’ operation or when the franchisor needs to train many new franchisee’s, or when franchisees need to employ staff. In Berlowitz’s words, it’s sometimes even necessary that social franchises switch their business model to full business format franchising, in order to remain capable of delivering high quality and quantity of service even more rapidly. In such situations, it needs to be kept in mind that the franchise still exists with a social cause, so we can remain including it under the umbrella term social enterprise, despite a slightly higher focus on monetization.

Furthermore, Berelowitz speaks about the necessary preconditions or things to keep in mind when thinking about boarding a social franchise train, whichever side of it you are boarding. The initial and most important point is that a potential franchisee as well as franchisors pay significant attention to the chosen project, i.e., the potential franchisee needs to make sure that the idea they pursue has a proven track record in social impact as well as financial sustainability, whereas the franchisors must pay more attention to forecasting and thinking about the things that could go wrong, the knowledge they must urgently transfer to their franchisees, which knowledge should be only kept by the franchisor, etc. Furthermore, it is important that potential social franchisors pay significant attention to who they choose as franchisees. Sadly, franchisors have to sometimes also find a good balance between quality of the service they provide and the quantity they can provide at the specified quality. More specifically they need to decide when to sacrifice the quality in order to be able to deliver its’ necessary quantity. Either way, franchising and its’ social counterpart are highly recommended to companies and social enterprises which see a high potential to growth, so if you have an idea that you are certain could change the world for the better and you’re nearly certain it would succeed, you should certainly look into social franchising in more depth.

The following and the last part of the article will include a few examples of social franchises, so you can perhaps explore them a bit more and see in which way they operate and learn more about their contribution to our society.

(to be continued…)

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