The Franchise Solution to Social Enterprise Branding

By Dan Elitzer, Senior Associate
Community Wealth Ventures

A growing number of nonprofit organizations are looking to brand development as a means to improve their ability to “cut through the clutter” of messages and options available in the marketplace.  More and more, nonprofits are recognizing the importance of brand stewardship in advancing mission¹.  This trend bodes well for the sector, as leading strategic thinkers like Good to Great’s Jim Collins have observed that a strong brand is a driving force behind building a great social sector organization².

Investing in a strong brand can help an organization achieve success far beyond what its size, resources, or experience would indicate, making it one of the best investments an organization can make toward its long-term success. A strong brand commands visibility and awareness, preventing an organization from being swallowed up in the sea of competition. During these tough economic times when foundation endowments are shrinking and funding is tightening at the same time that nonprofit services are needed more than ever, the ability to leverage a strong brand can help improve an organization's ability to survive.  A growing number of nonprofit leaders are taking this challenge of branding a social enterprise and turning it into an opportunity by adopting a business model that has been used in the private sector for more than a century: franchising. 

The industry’s largest trade group, the International Franchise Association, defines franchising as a method of distributing products or services involving “(1) the franchisor, who lends his trademark or trade name and a business system; and (2) the franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system”³.

When developed properly, a strong brand can provide clarity of purpose, motivate and unify staff members and volunteers, and even guide mission services⁴. The best franchises are those closely tied to the nonprofit’s mission. If the two are too far apart – say, back-office administrative services provided by a childcare organization – it may actually create confusion, diluting the value of the nonprofit's brand and at the same time inhibiting the social enterprise’s ability to attract customers.

Using a known franchise has clear advantages when embarking on a social enterprise strategy for an organization. Anecdotal reports from the dozens of human service organizations Community Wealth Ventures has worked with over the years suggest that one of the biggest hurdles to growing a social enterprise is convincing potential customers that the product or service the social enterprise provides is just as good as that offered by its for-profit competitors.

No social enterprise understands the power of a franchise better than Platte River Industries (PRI), a Denver-based nonprofit that creates market-based employment opportunities for individuals with disabilities. In the 1990s, PRI operated Rocky Pop Popcorn, a small popcorn concession stand in the Denver International Airport, generating a modest profit and occasional employment opportunities for individuals with disabilities. In 1998, PRI decided to venture into social franchising by purchasing the Auntie Anne’s pretzel stand across the concourse. Since then, PRI has opened four other Auntie Anne’s franchises (one has since closed), which altogether employ about 30 people (half of them with disabilities) and which net $300,000 for the organization each year.

Could PRI have achieved that kind of results with Rocky Pop Popcorn?  Probably not.  But with a recognized brand, PRI has been able to expand its social enterprise activity to achieve both mission and financial goals.

After tasting success with its Auntie Anne’s shops, PRI decided to make an aggressive push to expand its janitorial services business from government set-aside contracts to competing in the private market. This time it turned to a ServiceMaster Clean franchise.  Although PRI already had significant experience providing janitorial services via its government contracts, potential commercial clients may have been skeptical at the idea of hiring a nonprofit.  Now, with the ability to approach companies under the ServiceMaster brand, PRI’s potential clients see them as just another unit within a billion-dollar global company. 

Branding is not the only advantage of taking a social franchise approach. Beaver County Rehabilitation Center (BCRC), a nonprofit in New Brighton, PA, that provides opportunities for vocationally challenged individuals to obtain employment, opened a Candy Bouquet franchise in 2001. Candy Bouquet is a franchise that sells candy arrangements that resemble floral bouquets. The creative and labor-intensive nature of assembling each candy bouquet provides meaningful work for the organization’s constituents, which was BCRC’s primary goal for the franchise. Another nonprofit benefiting from social franchising is True Bethel Baptist Church in Buffalo, NY, which operates a Subway franchise, the largest submarine-sandwich franchise in the world. True Bethel Baptist Church opened its Subway franchise in 2004 to bring a recognizable “healthy fast food” option to a community lacking healthful restaurants – and the church has generated a profit since the first year of operation.

Case studies of these and other social franchises can be found in Community Wealth Venture’s recent publication, Streams of Hope – Social Franchising: A New Path to Wealth for Nonprofits, which can be downloaded for free here.

Social franchising is not right for every nonprofit or every social enterprise venture and even if you do choose to invest in a franchise, a recognizable brand is only one of many factors you need to consider. Selecting the right kind of franchise requires significant due diligence – identifying your organization’s internal assets, assessing local market opportunity, identifying top franchise partners, and negotiating a franchise agreement.  Social franchising is not easy, but it provides a compelling opportunity for nonprofits to boost their earned income activities.

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