Ben Litalien: On the Power of Social Franchising : Excerpts from his interview with Brigit Larson, in the People Spotlight for franchise1851.com
Dr. Litalien is the visionary founder and President of FranchiseWell. His unique interest in Social Franchising has made him the industry’s leading expert in non-profit franchising, and in the development of franchise concepts targeted to address important social issues.
Dr. Benjamin C. Litalien has spent three decades in the franchise community. Ans completed his doctoral program at the University of Maryland University College with an award-winning dissertation focused on the theory of Social Franchise. As a staff member at Georgetown University’s Center for Continuing and Professional Education, he created the Franchise Management Certificate program, which he now teaches each semester at Georgetown for franchise professionals from the U.S. and around the world.
What is social franchising?
A ” social Franchise” is a nonprofit owed franchise. For example, A Goodwill affiliate that owns a Subway franchise, co-branded in their retail store . Social franchising is replicating a nonprofit program through a franchise model.
Why should brands get involved with social franchising? What areas of their business will it help specifically?
I have nonprofit clients that operate numerous franchise brands, including Subway, Link Staffing, The UPS Store, Papa Murphy’s, Auntie Anne’s Pretzels, Auto-Lab Complete Car Care Centers, and Zerorez Carpet/Tile Cleaning. These organizations are committed to the franchise business; however, they hire a manager from the industry to run the business so they are more of an “investor” than an “operator.” Some concepts do not work well in that model, so caution should be given to matching the right nonprofit to the right franchise.
How will it help with job creation?
One of the key benefits to a nonprofit owned franchise is on the employment side. Given that the franchisor should not be heavily involved in the franchisee’s employment practices, this gives the nonprofit significant latitude to work with their client base in conjunction with the business model. This works well for organizations that are serving disadvantaged populations such as prison re-entry, disabled or otherwise. It should be noted that nonprofit organizations are held to all the franchisors “brand standards” in this process.
How will it generate revenue?
The goal of the franchise model is to maximize net income. While many make their decision on a franchise based on lifestyle or personal preference, they certainly are expecting a return on their investment at or better than other investment options. If a nonprofit operates a franchised business that produces net income, those funds can be returned to the nonprofit through various means (e.g. donation, dividend) depending on the legal structure and the organizational goals.
How should a brand (non-profit or franchisor) go about creating a social franchise strategy?
Education. My research on social franchises clearly indicated that both parties had very undeveloped understandings of each other’s sectors. In fact, when I reach out to many franchisors to talk about considering a nonprofit client, their response is “Why would I want to sell a franchise to an organization with a goal of ‘not making money’?” Nothing is further from the truth. As any nonprofit leader will tell you, “No money, no mission.” The vast majority of nonprofit organizations are active in business generating income to support their mission. I conduct “Social Franchise Workshops” for nonprofit organizations to help them understand the franchise model, and I work with franchisor leadership to help them understand the nonprofit sector. This is critical before engaging in a relationship.
How should a franchisor decide what social issues to connect with their brand?
The vast majority of franchise companies have no “charity of choice”, rather they let individual franchisees focus on local charitable and other social activities. While this is a good thing, it does not endure to the value of the brand overall. As franchise systems grow, leadership should be actively considering if there might be a social activity or cause that could help define the brand value to the benefit of all stakeholders.
Are there certain vertical markets in franchising that are better suited for social franchising than others?
There are two primary drivers for a nonprofit seeking a franchise. First, they may want to generate unrestricted income to support their mission. The key in this approach is to identify proven “investor” models where strong returns are prevalent without having to be an owner and operator. This often can lead to considering area development opportunities as well. The second driver is job creation. Concepts that have a need for employees are of interest, especially when the agency can determine if their clients can effectively handle some of the positions.