Social franchising in Europe 2011

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Social franchising in Europe 2011


Contents

Introduction

Social franchising is a growing movement designed to speed up the growth and impact of social enterprises and co-operatives.

It is a methodology that has been developed by a number of social enterprises across Europe and beyond. It is also a method more generally used by the social economy, but here we focus on the impact of social franchising in the trading social enterprise sector.

This research has been conducted by the European Social Franchising Network on behalf of the Network for the Better Future for the Social Economy BFSE funded by the European Commission. You can find out more at http://www.socialfranchising.coop

Social franchises – what are they?

Social franchising is a means of enabling social enterprises and the social economy to create more employment for disadvantaged people and achieve social aims. This is done principally by enabling joint working and knowledge sharing and transfer. It is comparable to commercial franchising but it has a social purpose, most commonly the creation of employment for disadvantaged people. For us, to be a social franchise both the social franchisor and franchisees must be social enterprises (ie businesses that trade and have a social purpose) and there should be:

  1. An organisation that replicates a social enterprise business model – the social franchisor
  2. At least one independent social franchisee that has been replicated by the social franchisor
  3. A common brand under which the social franchisees operate.
  4. An interchange of knowledge between members

Methodology

Through our contacts, ESF Managing Authorities and other method we identified 58 potential social franchises and aspiring social franchises (see appendix). We e-mailed these organisations and asked them to complete an online survey. The purpose of this survey was to gather information on social franchises and their impact and to develop a directory of social franchises.

19 social franchisors operating 20 social franchises (one organisation gave results for two social franchises) and four aspiring social franchises responded and completed the survey.

Results

The number of social franchises in Europe

Through our research we identified 57 social franchises and aspiring social franchises identified across Europe. They are spread across Europe and exist in 12 European countries. The UK leads in terms of numbers of social franchises with 30 followed by Germany with six. A list of these social franchises and aspiring social franchises is given in Appendix 1.

Where are they from?

As with our identified population of social franchises operating across Europe, the largest number of respondents to the survey were from the UK. The next largest number was Belgium, with 3 social franchises. However, they employed the largest number of people.

What do they do?

Combining all the relevant areas, environmental activities are the largest trading area (11) followed by health and social care (5). The majority of the respondents were in service provision (20) with 4 involved in retailing. None were involved in manufacture. This pattern largely reflects the range of activities social enterprises and social cooperatives are involved in across Europe.

The scale of existing social franchises

Social franchises are having a significant impact. The results for the 19 existing social show that:

  • They employ 6,766 employees
  • 65% of their employees are disadvantaged in the labour market (e.g. have a disability)
  • They have a combined turnover of €199,843,600.
  • They have in total 324 social franchisees and the average social franchisor has 21 franchises.

As with all enterprises, a number are significantly bigger than the rest. Komosie’s De Kringwinkel recycling shops and refurbishment business employs 3,861 people, the CAP Markt supermarkets employ 1,200 whilst the smallest social franchise employs 1 person.

Turnover follows a similar pattern, with CAP Markt having the largest turnover (€115 million) which reflects the nature of its business.

Extrapolating from our sample, the total population of social franchises in Europe can be assumed to employ at least 13,000 people and have a turnover of over €400 million. This makes them a significant part of the European social economy.

Accelerating the growth of social enterprise

One of the key aims of the social fantasising approach, mentioned by 50% of the social franchisors as a reason for developing a social franchise, is to provide for more rapid growth of social enterprises.

“It has taken us 10 years to develop a community based professional mental health service that is able to win contracts from public sector commissioners and meet professional standards and this has been replicated in a format that with training can enable qualified franchisees 12 months to get fully operational and set up.”

Evidence from the survey indicates that the promise of rapid growth is beginning to be realised. Most social franchises are relatively new and have thus grown relatively rapidly, with 40% of our sample having established their first franchise in the last five years and over 80% in the last ten years.

This growth might be expected to be exponential in that in the early years establishing a new social franchise is more difficult and there is less demand for an unproven model that is not well known.

Looking at more established social franchises like CAP Market in Germany indicates that the possibility of rapid exponential growth can be achieved. CAP Markt opened its first supermarket in 1999 and opened its second in 2000. Thereafter each year saw, on average, more and more CAP Markts being opened with 11 being opened in 2010.

As many of the social franchises are still relatively new (less than five years old) it might be assumed that even if no new social franchises were formed, the employment potential of those that exist is very large.

Establishing a social franchise

60% of our sample developed their social franchise without external advice or support. The most common form of support was from a social enterprise specific support agency (6 respondents) and one respondent received support from a general business development agency.

14 (76%) received funding to establish their social franchise with the rest funding the development from their own resources. By far the most common source of funding was from the European Social Fund and we suspect most of this was through the Equal programme (8 or 57%), with the next largest source of finance being a government grant (3). Only one respondent received funding from a charitable trust or foundation.

Running a social franchise

Most (17) charge an ongoing fee to be part of the franchise. This pays for common services and the growth of the franchise. The methods used for calculating fees varied considerably and often reflected the type of business the franchise operated in. However, in most cases (9) this was levied either solely as a percentage of turnover or as a percentage of turnover plus some other methodology. The size of the percentage varied significantly from 0.7% to 10%.

Four charged a fixed fee (ranging from €120 to €10,000) and 1 used a percentage of profits.

In terms of start up, 10 social franchisors charged a fee to a person or organization wishing to develop their social franchise. This fee varied considerably from €150 to €50,000. There may be some issue of meaning here, however. A number of franchisors do not charge a start up fee but they still expect the person or organisation to work with them to raise the finance to set up a social franchise.

Total start up costs for a social franchisee, including any fees levied, also varied considerably from €3,000 to €750,000 depending on the nature of the business. For example, establishing a hotel through Le Mat is going to be considerably more expensive than setting up, say, a counselling service as with MyTime CIC.

Most social franchises provide an operating manual (14). For some organizations transfer of knowledge can’t be done in this way because of the scope of the enterprise. Thus, for example, each of The Foster Care Cooperatives will have a similar method of operation providing the same basic service. It is thus straightforward to develop an operating manual. Community Renewable Energy works with communities to set up a range of renewable energy systems and each business might be developing very different forms of renewable energy making it more difficult to produce a set manual.

Motivation

The two principle reason for setting up a social franchise was the creation of employment for disadvantaged people (over 50%) and as a means of growing a social enterprise: “To create the maximum number of paid jobs for people with disabilities possible.”

Interestingly, the development of the business and making it stronger and more competitive was also a significant reason (4 respondents): “To be able to negotiate as an equal partner with the government/railway company - gathering and sharing know-how between the different companies - shared product-development.”

Social motivation were also important and there was a clear interest in democratising our economy: “To enable ordinary people to own and operate their own renewable energy schemes and thereby to make a direct contribution to fight against climate change.”

Support needed

In terms of the support social franchises stated they needed, peer support and networking was the most frequently mentioned by the 23 existing and aspiring social franchisors (respondents could list more than one support need).

In conclusion

Our research has revealed that social franchising is already a significant element of the social enterprise sector in Europe. Indeed combining all social franchises together it is likely that, as a group, social franchises are as economically important as the social enterprise sectors of medium sized European countries.

Our research points to the fact that social franchising provides a proven method for more rapidly growing the social economy. However, many of the social franchises are relatively young (under 5 years old). If they follow the exponential growth pattern of older social franchises like Cap Markt, then social franchises are likely to become an even larger part of the social economy, even if no more new social franchises are formed.

If the lessons learnt by existing social franchises are also used and built on by other social enterprises, then social franchising could become even more important to the social economy than commercial franchises are to the private sector economy. We might then be truly witnessing a step change in growth of the social enterprise across Europe and the impact they have on employing disadvantaged people and building a better, fairer society.

Appendix 1: Social franchises and aspiring social franchises in Europe - 57

UK - 30

  • National Community Wood Recycling Project
  • MyBnk
  • Bikeworks
  • Riverford Organics
  • Ex-cell solutions
  • Ethical Property
  • Princess Royal Trust for Carers
  • Participle
  • Foster Care Cooperative
  • My Time CIC
  • Bio Regional
  • The Big Lemon
  • Household Energy Services
  • School for Social Entrepreneurs
  • Brighter Futures
  • Green Works
  • Fruit to Suit
  • Health Exchange
  • Future Clean
  • Friends of Farmers Markets
  • Commonwheels
  • Energy for All
  • Community Renewable Energy
  • Care and Share Associates (CASA)
  • Green Gym
  • Law for All
  • Pack-It
  • Big Green Valley
  • H2oPE
  • Sit N B Fit CIC

Italy - 4

  • Consorzio Pan
  • Atlantide
  • Comunità Solidali
  • Le Mat


Sweden - 3

Germany - 6

  • CAP Märkte
  • Dialogue in the Dark
  • Balu und du
  • Notinsel
  • Miniphaenomenta
  • Lifeguide

Denmark - 1

France - 3

  • AETES Environnment
  • Energies Alternatives
  • Optimom

Belgium - 4

  • Komosie
  • Groep INTRO
  • Fietsenwerk
  • Age d’Or Services

Lithuania - 1

  • Reda Sutkuviene

Netherlands - 1

  • Fietspunt

Greece - 1

Poland - 1

Portugal - 1

  • Empowerment Gateway