When is Social Franchising the applicable strategy

When is Social Franchising an applicable strategy

Social franchising

Social franchising is implemented as a distribution model for social services or products and services that pursue social goals. Therefore, a social need must exist for social franchising to be applicable. This can be seen in commercial market conditions, where demand stimulates supply of a service.

As with commercial franchising, the benefits of a franchise model, being:

  • replication of a proven system and brand, are attractive to the providers of social purpose organizations too.
  • The pursuit of economies of scale, standardisation and geographical dispersion also makes franchising an attractive business model for organizations with social goals.

The following conditions make franchising an appropriate strategy: 

  • Increase in unmet demand for services
  • Customers who are prepared to pay for the service
  • Limited access to services
  • Availability of trained practitioners (potential franchisees)
  • Lack of supply from private sector
  • Under-utilised capacity of existing facilities
  • Difficulties for potential franchisees to raise capital

The preconditions for successful social franchising includes: 

  • Sustained or growing consumer demand
  • A pool of potential franchisees
  • A market that can sustain new entrants, given that market conditions will differ considerably across developing countries

These preconditions are also applicable in commercial franchising. While it is important to have a pool of potential franchisees, the existence of a sustainable franchisor is another condition for success of a social franchise.

A problem that exists in commercial franchising is even more applicable in social franchising, namely the success and continuity of the franchisor. The franchise network cannot exist without the ongoing management and support from the franchisor. Should the franchisor fail, the survival of the network would be in jeopardy.

Access to sufficient financial and organisational capacity

The implementation of a social franchise network is time consuming as the franchisor has to

  • recruit, train and monitor franchisees
  • also maintain central marketing, procurement and fundraising functions.

Organisations that have a lack of these resources are not suitable to social franchises

Social purpose organisations often experience resource constraints due to a lack of funding. However, the social franchising effort needs a dedicated resource to guide and drive development to implement replication successfully.

The financial burden of supporting franchisees with fundraising is an additional strain on the organization. If the franchisees are expected to do their own fundraising, the franchisor should research whether sources of funding are available in areas earmarked for replication prior to launching a social franchise network.

Sources

  • Bonnici, F., du Toit, A., & Henrikssen, T. (2015). Insights from the implementation of a Social Franchising Accelerator programme in South Africa. In International Conference on Economics and Management of Networks – EMNet. Cape Town.
  • Fleisch, H. (2008). Social franchising: A way of systematic replication to increase social impact. Berlin.
  • Smith, E. (2002). Social franchising of reproductive health services. Can it work? (No. 5).

Get in touch with Franchising Plus to discuss social franchising in detail, contact us today

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