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The McDonald's template for social change

22 November 2012
Dan Berelowitz

Create clear shared financial agreements – money is where the most discomfort comes for franchiser and franchisee.

Would more great ideas reach scale if social entrepreneurs dropped the ego and embraced social franchising? Dan Berelowitz, founder and chief executive of The International Centre for Social Franchising thinks they might.

In recent years I have become increasingly frustrated by brilliant but small social programmes which reach hundreds rather than hundreds of thousands. It left me wondering why these small-scale programmes weren’t able to grow, expand, export and evolve to meet the scale of the problems they set out to tackle.

It has also dawned on me that funders seem obsessed by funding start-ups and few prizes exist for investment in existing projects. The social sector is full of well meaning people who want action, fast. Dare I say some are led by ego and consider they might do better themselves, eschewing investment in scaling up existing programmes, wanting to create their own.
 
Enter the idea of social franchising and the notion we can apply the model of commercial franchising to the social sector with good results. This does not involve throwing out social values and passion, but using the proven method of franchising to grow the best and help those who need it most. Critically, it is about maintaining all those good things that a small charity has, being able to adapt to the local environment, being community focused while achieving scale through replication.
 
We are all familiar with the concept of franchising, it defines most of our high streets. It has significantly influenced what we eat and the coffee we drink. In fact commercial franchising is worth £13.4bn to the British economy.
 
The opportunity franchising offers is scale and halts the obsession (and unsustainable) allure of constant start-ups. Why not invest in what already works? Why not export a successful model to a community in need elsewhere? In conversations with McDonald’s, The Body Shop and others I learned that many of the commercial methods apply just as well to socially driven enterprises.
 
Social franchising is nothing new, it has happened in Coram Life Education, with the Youth Hostel Association and Le Mat; all over Britain and Europe we have living examples of successful social franchises. But what I recently discovered in my new research is that the scope for social franchising is greater than we
thought and research commissioned by the Big Lottery Fund will soon establish its value to the UK economy.
 
In my research I compared The Trussell Trust’s Foodbank with McDonald’s - both excellent examples of franchising in action. Foodbanks provide a minimum of three days' food and support for people experiencing crisis in the UK. The first foodbank franchise opened in 2004. In 2010 the need for help soared and in 18 months the number of Foodbanks leaped from 55 to over 200. There are now over 300 with more than two more opening every week. This rise was driven by church groups responding to local need and contacting Trussell Trust for help.
 
For a one-off fee of £1,500 you can buy the template of a Foodbank – a successful, tried and tested programme. It is hard to see how over 200 new programme responses to food poverty could have been set up and operational in such a short period of time without belief in the Trussel Trust's credibility and the fact that it is ready to franchise.
 
What’s great is that by using a franchise system they are keeping understanding and trust in local communities while rapidly reaching scale.
 
McDonald's could be a viewed as an unlikely guru for social enterprises but the research showed lessons from its franchsing model are directly transferable. Almost 70% are owned by well governed franchisees in the UK, handpicked for their ability to “not reinvent the wheel, just turn it faster".  The business continues to grow. I talked in depth to McDonald's and learned the key principles for a franchise's success; they are surprisingly simple, and chime with the challenges of running many types of organisation.
 
Pick your franchisee wisely, invest in them, create a network and connect the people within it to each other, create clear shared financial agreements – money is where the most discomfort comes for franchiser and franchisee. Importantly, be sensitive to the local environment and need, and don’t standardise at expense of cultural sensitivity. This is no ‘project in a box’ quick win, but a different approach. Arguably, franchising in the social sector holds an added layer of complexity as money can flow from franchisee and franchiser and franchisees might actually be community groups and organisations rather than individual holders.
 
While McDonald's has now opened its first vegetarian restaurant in India, we recently heard about Madonna’s money disapearing down the drain as her educational charity failed to get off the ground. Many start-up social enterprises fail. Although getting an organisation ready for scale is hard, so many are doing it it’s hard to see how social franchising won’t take off.
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