Social Franchises Mostly Fail

Written by Rolfe Larson | Edited by ian
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    A recent discussion on the npEnterprise Forum (the global social enterprise listserv) revealed several key points about social franchises owned by nonprofit organizations. First, and foremost, they rarely succeed in meeting the nonprofit’s goals.

    Alan Garner pointed out that several major nonprofit publications have reviewed this issue recently, with the consensus that they are rarely profitable, and that they required much more work/labor than the nonprofit realized. These articles also indicated that unless you pay full-freight for the franchise fee (not the nonprofit fee, if they have one) you don’t get a prime location. Finally, they noted that most franchises are owned by an individual or a couple who each put in 80 hours a week managing the business.

    Ben Litalien, an expert in franchising, indicated that a nonprofit is not a ‘typical franchisee’ and therefore should not expect the same results. A nonprofit is a corporation, and in the franchise sector should be viewed as an ‘investor type’ franchise prospect. This requires a significantly different approach than the individual that seeks to own/operate a franchise. The investor model requires a clear competitive advantage to overtake the lack of owner passion in the traditional franchise model.

    Click here for the full discussion about this topic on the npEnterprise Forum listserv, or here for a report from Community Wealth Ventures about social franchises.

    Rolfe Larson