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Contents
Acknowledgements
1. foreword
Executive summary 4
2. Introduction 7
3.Whysocial franchisingand what is it? 11
4. Keyprinciples of social franchising 20
5.Whysocial franchisingworks for social enterprise 31
6. Issues for social franchising 36
7.The step-by-step guide 43
In conclusion 47
Appendices
1. Care and Share Associates -
Employee-owned social care 48
2. Option C Car Club - A car club network 52
3. CAP Mrkte - Shoppingfor social benefit 54
4. Le Mat - A social hotel chain 57
5. CommunityRenewable Energy-
Developingrenewable energyand communityprofits 59
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Acknowledgements
This booklet is one of the main outputs of the INSPIRE Development Partnership, based in the North
East of England. It has been written to indentify, through research and development, social enterprise
opportunities that could, through new replication methodologies, lead to amuch more rapid growth of
social enterprises.The INSPIRE Development Partnership was funded over two years principallybythe
EQUAL CommunityInitiative, part of the European Social Fund, and One North East. It comprised the
followingorganisations:
North East Social Enterprise Partnership - lead body
Development Trust Association (North East)
Social Firms North East
Social Enterprise Sunderland
CommunityVentures Limited
Care and Share Associates
CommunityRenewable Energy
Option C
Economic Partnerships
Dixon Berriman Associates
Comecon
Social Enterprise Europe
We would like to thank the many people and organisations who have contributed to the develop-
ment and production of this guide.They include:
all the social franchises and support agencies within INSPIRE, in other parts of the UK
and in the rest of Europe - in particular, we would like to thank the social franchises
who allowed us to use themas case studies;
the Social Enterprise Coalition, which has helped with our research and
mainstreaming;
our transnational partners in the Sharing, Identifying, Promotingand Sustaining
Partnership (SIPS) fromEastern England, Finland, Germany, Italy, Lithuania and Poland,
and members of the European Social FranchisingNetwork.
This guide has been written by Keith Richardson and Dr Guy Turnbull fromEconomic
Partnerships and has drawn on and incorporated case studies and other materials produced by
Toby Johnson and Dorotea Daniele fromDIESIS for the SIPS Partnership, Richard Falconer of
NESEP and Mike Berriman of Dixon Berriman Associates.
1.Foreword and
Executive summary
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Opposites Attract
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Executive summary
Thisdocument aimsto provideaguideto thosewishingto set upasocial franchiseor thoseinvolved insup-
portingsocial enterprises.Theguideisbased ontheexperienceof theINSPIREprogrammeinsettingup
social franchises,together withextensiveresearchonsocial franchisesacrossEurope.
The need for social franchising
To grow the social enterprise sector more quicklyand more effectively
To better exploit opportunities
To competewiththepublic andprivatesectors
The origins of social franchising
The ideafor social franchisinghas its roots in:
commercial franchising
Italian consortia- where large number of social co-operatives are federated together
systems theoryand the waynatural systems are self-organising
Interestingly,theconcept of social franchisinghasbeendevelopedbyanumber of peopleacrosstheworldinparallel.
Key principles of social franchising
Fromour research and experience, we have identified the followingprinciples that need to be considered
when developingasocial franchise:
1. Adoption of suitable sectors of the economyto colonise
2. Replication of asuccessful and proven business and social enterprise model
3. Injection of qualitybusiness support, financial backing, time and money
4. Pickingpeople and organisations - find the 'entrepreneurial manager'
5. What are the keycomponents of replication (geography, brand, systems, product, and
approach)?What is the social franchise offer?
6. Clarityof relationship constantlyand clearlycommunicated and the abilityto enshrine and
ensure mutuality
7. Creation of asocial franchise businesses where increase in size is of mutual benefit to the
franchisor and the franchisees
1.Foreword
Social enterprises are profit-making businesses set up to
tackle social or environmental issues. More simply put, they
provide business solutions to social
problems.
The value of social enterprise has been acknowledged by
the current UK government and opposition parties.They
have recognised the positive impacts such businesses can
have on improving society.
We have seen the numbers of social enterprises grow rapidly in the last five years. If social
enterprise is to achieve its potential to deliver lasting social change, the movement needs to
develop new and bold means to ensure that this growth is meaningful. 'Social' and 'enterprise'
were once viewed as diametrically opposed ideas.We know now that social and enterprise,
together, are the future.
We now have the opportunity to see how franchising can be more widely interpreted to
include a social dimension. Sunderland Home Care Associates, the winner of last year's
Enterprising Solutions Award, has demonstrated that social franchising can work.We need to
see many more examples of businesses using this model to fully measure the impact it can
make in growing the movement.
'Opposites Attract' distils the key ingredients of Sunderland Home Care Associates' and oth-
ers' success for us all to use and build on. It showcases a potentially powerful tool to enhance
and increase the contribution that social enterprise can make to all our lives.
Jonathan Bland
Chief Executive, Social Enterprise Coalition
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2.Introduction
Issues for social franchising
Social franchisingis still at an earlystage of development and there are anumber of issues that need to be
considered and thought through before establishingasocial franchise.These include:
1. Commercial franchisesgenerallyrestrict accessto intellectual property(IP) to protect theinterestsof
thefranchisor andfranchisees.But isit ethical to do thisfor enterprisescreatedto helpdisadvantaged
peopleor meet social goals?Moreover,might therebeanadvantageinfollowingtheOpenSourcemove
ment andmakingIP freelyavailable?Isnot theownershipof thebrandandtheknowledgeto useit more
important thanmanuals?
2. All social franchiseshaveasocial purpose,but shouldtheybeownedmutuallybythesocial
franchisees?
3. How do weensurequalityandensureonebadappledoesnot undulyaffect thewholesocial
franchise?
4. Venturedevelopment,which meanssupportingtheestablishment of asocial franchiseefreeof
chargeand then takingashareof theincomeit generates,isessential if asocial franchiseisto be
market-driven.But issuch an approach ethical or practical,how much profit can betaken out of a
social enterpriseand isthisenough to trulypayback thesocial franchisor for their investment of
timeand resources?
Steps to creating a social franchise
1. Colonisation - make sure you are in the right business
2. Identifyan effective business model
3. Ensure you the social franchisor have sufficient capacityand the right skills
4. Build the social franchise model
5. Identifythepilot unitsandmakesuretheywork
6. Implementation- rollingout thesocial franchise
7. Social franchisees successfullytrading
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Opposites Attract
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Because of this focus on social enterprise, in the past three years there has been significant interest in
findingnew ways to foster the growth of the social enterprise sector. One areathat has been looked at
closelyis 'social enterprise replication' and/or social franchising- that is usingarange of licensingand
franchise formattingtechniques to rapidlyincrease the stock of social enterprises and social co-operatives
across Europe.
The guide considers the progress of these initiatives, not in terms of makingan impact assessment (each
individual programme is subject to its own external evaluation), but in terms of what keylessons can be
learnt, and how these lessons translate into a'how to replicate social enterprise guide'. In essence there-
fore, this document was not designed to answer whether or not social franchisingis agood idea, though it
does inevitablycast light onthis.Rather it setsout to provideastep-by-stepguideto how to successfullyrepli-
catesocial enterprises.
AHalfwayHouse'Villa Vgenut' inSweden
2.Introduction
This document aims, perhaps somewhat ambitiously, to provide those practicallyinterested in social fran-
chisingwith a'how to guide' to developingsuccessful social enterprise models through social franchising.
We sayambitious, because social franchisingis arelativelynew concept, and therefore what we write here
will not be the definitive guide. It is too earlyto write such athing.
We also hope it will identifyissues that need to be addressed and give some ideaof the potential we
believe social franchisinghas to have amajor impact on the growth of social enterprise in the UK and
beyond. It draws upon our own experience in INSPIRE and awealth of European experience in develop-
ing, managing, and replicatingethically-based and driven business.
Social enterprises are values-based businesses, which combine the responsive and entrepreneurial abilities
of private enterprise with the social values of the public and charitable sectors.
Althoughit isanew name,social enterprisecantraceitslineageback throughtheco-operativemovement
and beyond to themutualsand buildingsocietiesand ethicallyinspired businessessuchasBootsand Barclays.
Someof theseenterpriseshavelost their ethical rootsand/or haveconverted into for-profit organisations,
Nonetheless,it isclear that intheUK social enterprisehasaproud historyand hasnot merelybeenabit
player onthemargins,but hasplayed adecisiveroleinshapingtheeconomyand societywelivein.
Now there is anew wave of interest in social enterprise and awill not just to see it as ameans of dealing
with market failure but as ameans of reinvigoratingour economyand public services, improvinglocal
accountabilityand tacklingsome of the most critical issues of our time that neither the public nor the pri-
vate sector have been able to convincinglyaddress.
With their unique combination of enterprise and social accountability, theyare increasinglybeingregarded
in the UK as a'new' means of meetinggovernmental and societal objectives rangingfromlimitingclimate
change to modernisingpublic services.
As aresult of this policyinterest there has been aplethoraof initiatives to support the development of
such social enterprises. 1.Underneath this policyinterest however, there is arguablyanew globallyrelevant
business model beingforged, one whose antecedents go much deeper than anyshort-termpolitical
imperative.The collapse of communism, the reaction to globalisation, ever growingenvironmental con-
cerns and the state's withdrawal fromthe deliveryof health, social care and other public services, are all
drivers of social enterprise growth.The success of fair trade (driven primarilybysocial enterprises like
Traidcraft and Caf Direct) and well known social enterprises such as the Eden Project and the John
Lewis Partnership, are just afew examples of this drive in practice.
1. For examplethecreationof Social EnterpriseUnits withintheDepartment of TradeandIndustryandDepartment of
HealthintheUK, thecreationof new legal structures for social enterprises inFinland, Italy. LithuaniaandtheUK.
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3.Why social
franchising and what is it?
Inproducingthisguidewehavedrawnprincipallyonthelessonsof thesocial franchisesset upbyINSPIREtogether
withthreewell-establishedsocial franchisesfrommainlandEurope.TheINSPIREsocial franchisesare:
Careand ShareAssociates(CASA) franchisingtheSunderland HomeCareAssociatesemployee-
owned model of providingcareto older and disabled people
CommunityRenewable Energy(CoRE) which franchises expertise and resources to set up
community-owned renewable energysystems
Option C which franchises its Car Club model, basicallyamembership club that provides
flexible and accessible car hire
The European social franchises are:
CAP Markets - developed bymembers of our German transnational partners, this is achain of
franchised supermarkets which is arguablythe biggest social franchise in Europe.
Le Mat - achain of franchised hotels which is operatingin anumber of European countries
VillaVgen ut! workingwith people with drugand alcohol problems
INSPIREhasbeeninvolvedindevelopingother social franchises,whicharelesswell-developed,principallytheyare
Spruce Carpets, recyclingand reusingcarpets
A mattress recycler
FAST Food workingin communitycatering
Fair Stays hotels
Wehavealso workedwithGet HookedonFishing,whichfranchisesitsmeansof workingwithyoungpeople,and
oneof our partners,CommunityVentures,hasreplicateditssecurityservices.
Thisdocument providesanumber of tools,resources,and,intheappendices,casestudies.Moreandmore
detailedcasestudiesaswell asother informationareavailableat www.socialfranchising.coopandwww.inspirenorth-
east.co.uk.Elementsof thecasestudiesarewoveninto themainreport.Indoingthiswehavefocussedheavilyon
CASA,whichwaseffectivelyINSPIRE'strail-blazer andisour most developedsocial franchise.This model has
also received national recognition for its success, with Sunderland Home Care Associates beingaward-
ed the 2006 Social Enterprise of the Year Award by the then DTI and Observer in part for its success
in franchisingits business model.
Before movingon to these key messages in sections 3 and 4 however, the next section puts social
enterprise replication and franchisinginto abroader context.We feel it is important to generate a
mutual understandingof terms, definitions and drivers before settingout both the underlyingprinciples
of, and the step-by-step guide to, social enterprise franchising.
5. Business support for social enterprise, as it is for enterprise more generally, is of variable
quality. Enterprise support providers have atension between their short-termneeds to
create the out puts (e.g. jobs created) required by funders and the long-termviability of
the enterprises they support.This tension does not always provide the best support for
social enterprises which inherently take longer to set up.
6. Social enterprise support is largely generic and not focussed on particular business
sectors. Lack of specific business expertise within the sector could therefore impede
growth. In addition, experience of usingcommercial business support infrastructure has
not always been good due to alack of understandingof social enterprise.
7. The social enterprise sector has been very effective at respondingto new market
opportunities, such as fair trade and organics. However, it has not always been good at
capitalisingon its own innovation. For example, the organic food sector was dominated
by social enterprises in its early days but they are now minor players.
8. There is aneed to widen 'ideahorizons', and introduce excitingand innovative ideas to
buddingsocial entrepreneurs.We have developed too many one-off cafs and
horticultural enterprises!
9. Successful social enterprises find themselves the subject of many requests for visits and
information.This is both time-consumingand frustrating. Frustratingbecause social
enterprises like SHCA want to support new social enterprises developinglike themselves,
but cannot provide themwith the time and resources needed to have areal impact.Thus
one visit to SHCA does not provide the depth of knowledge that would enable others to
copy the model, but SHCA does not have the resources to provide more than this with
out jeopardisingits own survival.
As we shall see, we believe that social franchisingcan provide ameans of addressingmost or all of
these issues.
It provides the ability for social enterprises to retain their local roots, their accountability and the
cost-effectiveness of asmall enterprise with the ability to respond to large issues, to be part of a
larger and credible brand, to jointly provide services that the individual organisations cannot. It
makes startingasocial enterprise easier and quicker usingaproven 'business in abox' and makes it
easier to grow owingto the federated nature of asocial franchise. In addition, it provides atrade
and social enterprise specific market-orientated business support and development structure.
Sohowisthisachievedandwhat isa social franchise?
What is social franchising?
The term'replication' has become in vogue in recent years to describe arange of related methodologies
to roll out successful social enterprise models, includingsocial franchising.
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3.Why social franchising and what is it?
Before consideringactual workingexamples of social franchising, this section looks at whywe feel social
franchisingis important, sets out some basic definitions, and suggests the keyantecedents for this type of
business development approach.
Why social franchising?
Social enterprises face anumber of barriers to growth which social franchisingcan help overcome.They
include the following
1. Therearesomeexamplesof social enterprisesgrowinginto relativelylargebusinesses,suchasthe
EAGA PartnershipandtheCo-operativeGroup,but theyarecomparativelyrare. Researchby
Ecotec andothershasclearlydemonstratedthat themajorityof social enterprisesservepurelylocal
markets.Thereasonsfor thisarecomplex andultimatelyrelateto theoriginsof manysocial
enterprises.Mostlytheyhavebeenestablishedbylocal peopleto meet local needs.Thisisinmany
waysastrength,but it doesput abrakeonexpansion.To haveasignificant impact,alargenumber of
social enterprisesneedto beestablishedcomparedto thecommercial sector.Thisisdifficult pathto
follow andcreatesbarriersto social enterprisegrowthfor anumber of reasons.
2. Establishingasocial enterprise is at least as hard, and possiblyharder, than settingup aprivate
sector company. One-off development of social enterprises, as is largelypractised in the UK, is
therefore inherentlytime-consumingand difficult.The added burden of the legislative
requirements in manysectors and the need to be credible with purchasers means that setting
up lots of one-off enterprises is difficult. Margaret Elliot set up Sunderland Home Care
Associates over ten years ago, and she believes that it would now be impossible to do this in
the wayshe did it, given the demands of purchasers in social services and other sectors.
3. Peoplewith theskillsand entrepreneurial attitudeneeded to establish anyenterprise,let alonea
social enterprise,arein short supply.Peoplewho wish to set up social enterprisescome
disproportionatelyfromdisadvantaged communitieswhereaccessto financial resourcesand
businessexpertiseislimited.
4. Local enterprises, even though theymaybe more efficient and cost-effective, find it hard to
compete with larger businesses.Traditionallythis is felt to be the result of economies of scale.
This factor is overestimated in our view.The real reasons are:
thecredibilityof hiringawell-known company,the'nobodyever got fired for buying
IBM' attitude
the abilityof larger companies to provide amore complete service
the marketingpower of larger enterprises
the political strength and lobbyingabilityof large companies
the difficultysmall organisations face in meetinglegislative requirements
thepublic sector andbigger privateenterprisesdo not want to contract witha
multitudeof small providersasthisgreatlyincreasesthecostsof contract management
Opposites Attract
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licence - brand, operatingsystem, valuable know-how
social franchise - common brand, shared operatingsystems and services, ongoingsupport,
marketing, research and development, know-how
joint ventures and 'partnership' approaches to replication
Social enterprise replication therefore has akeysocial purpose:to rapidlyspread the contribution of
social enterprise principles to wider society.The social enterprise sector is therefore usingcommercial
practice to achieve social goals. In doingso, it is arguablyboth modifyingand improvingsuch commercial
practices. Social franchisingis an example of this. Keyelements that distinguish it fromother replication
methodologies are:
the presence of afranchisor, i.e. an organisation that mayor maynot be owned bythe
franchises it sets up, whose purpose is to encourage, support and develop franchises
acommon brand or shared identity
the provision of shared knowledge and resources
amore symbiotic and reciprocal relationship between hub and replication units - franchisor
and franchisee
Note that we have not included the concept of areplicable business format which implies the creation of,
for example, amanual for operatingthe business, as akeydefiningcriterion.We will elaborate on how we
have arrived at the above criteriain the rest of this guide.
Despite this caveat, the definition given bythe BFA is still relevant to social franchising. Just as acommer-
cial franchise should provide an untrained person with the resources to set up abusiness, so to should a
social franchise enable the same person or an organisation to set up asocial enterprise.
A wider perspective
Social franchisingis amuch more global phenomenon than might at first be thought. In the UK the best
known example is 15, the restaurant chain established byJamie Oliver and the BigIssue.There is also
Social Firms UK's portfolio of social enterprise replications includingAquamacs,The Soap Co. and Pack-IT.
CREATE, another EQUAL partnership focussingon franchisingfor disadvantaged people, has also been
involved in social franchising, workingwith Hidden Arts and Greenworks.
In Europe, as we have seen, Le Mat hotels, probablythe first social enterprise to call itself asocial fran-
chise, is crossingEuropean borders and CAP Markets, arguablythe biggest social franchise, has grown to
comprise around 55 supermarkets.
UnLtd has carried out research into social enterprise replication and it too has identified and supported a
number of social franchises, such as Schoolfriend etc., which provides high qualityafter-school care and
education.
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The British FranchisingAssociation (BFA) defines franchisingwithin the commercial sector as:
Businessformat franchisingisthegrantingof a licensebyoneperson(thefranchisor) toanother (the
franchisee),whichentitlesthefranchiseetotradeunder thetrademark/tradenameof thefranchisor
andtomakeuseof anentirepackage,comprisingall theelementsnecessarytoestablisha previously
untrainedpersoninthebusinessandtorunit withcontinual assistanceona predeterminedbasis.
Social franchisingis arelativelynew termand there are varyingviews on what it means in practice.
CAN succinctlystates:
SOCIAL FRANCHISING isatermincreasinglyusedto describetheprocessbywhichsocial enterprisesrepli-
catetheir successful businessformulas It'sbasedupontheconcept of franchisinginthecommercial sector,
associatedwiththegrowthof someof theworld'sbest knownhighstreet brands.Franchisingenablesrapid
growthbyenablingindividualsto buyaprovenbusinessformat andrunit astheir ownbusiness...Inthesocial
economy,Social Franchisingisusedmorebroadlyto describeawiderangeof replicatedsocial businessesoften
usingfranchising,licensingor partnershipto buildnetworksaroundacommonprovenformula.
Others are more prescriptive.
Social Franchise n. uses the structure of acommercial franchise to achieve social goals. - Universityof
California, Berkeley
We see social franchisingas asubset of arange of replication methodologies.
Replication can be characterised bythe following:
1. The originators or developers of the business ideaare activelyinvolved in promotingthe
business idea(i.e. it is not apassive process);
2. These originators will benefit fromthe business ideabeingreplicated - this benefit could be,
for example, in the formof fees or creatingastronger business or brand;
3. Replicated companies will have some independent management and ownership, probablyat
least 25%, i.e. the businesses will have some independence fromthe core. It will not be, for
example, aretail chain.
For the purposes of this guide, social enterprise replication is seen to encapsulate the followingbusiness
replication approaches:
copyingabusiness concept or system, with the active involvement of the originators of the
business idea
business to business transfer of know-how to enable abusiness model to be replicated in
whole or in part
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Opposites Attract
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Business growth requires enterprises to:
minimise costs and maximise income
be flexible and responsive to the market
be entrepreneurial
have acommon purpose and clear direction
have market credibilityand presence
The size of an organisation has agreat influence on these factors. For example, size generallybrings with
it market credibilityand presence together with the abilityto reduce costs bybulk purchasing. However,
smaller organisations find it easier to be entrepreneurial and responsive to markets, to reduce costs by
beingefficient and to maintain asense of common purpose and direction.
Commercial franchisingattemptsto combinetheadvantagesof smaller moreresponsiveentrepreneurial organi-
sationswiththemarket presenceandeconomiesof scaleof larger organisations.If it isregardedasabusiness
start-upmethod,it provesto beverysuccessful inthat thefailurerateof franchiseesismuchlower thanbusi-
nessstart-upfromscratch.Asabusinessgrowthmethod,it isalso verysuccessful,asfranchiseshavebeenseen
to grow veryrapidly.Inthecommercial worldthereisveryoftenatensionbetweenprivateenterprisesthat co-
operatewitheachother becauseof their shareddriveto maximiseprofits.Theneedto control thisdestructive
tensionpushesthefranchisor,whichownsandcontrolsthebrandor replicablebusinessmodel,to harnessthe
entrepreneurial activitiesof thefranchisesthroughbureaucratic structuresandlegalistic licenses.Thiscanreduce
thescopefranchiseshaveto respondto local market conditions.
Some franchises have relaxed the prescriptive nature of their franchise.The BodyShop is an example of
this. Perhaps one reason whyit has been able to do this successfullyis the strongand shared ethical val-
ues of the BodyShop and its franchises.This helps create an additional bond between the businesses
involved that allows the operational activities to be less tightlypoliced and constrained.
Other franchiseshavefoundwaysother thananimposedlicenceto organiseandminimisecompetitivetensions.
For example,someof themost successful franchises(thoughtheremaybesomedebateaswhether theyarefran-
chisesor licenses) areownednot byaseparatecompanybut bythosepeoplethat implement thefranchise.This
hasprovedto beeffectiveevenfor organisationsthat aredirect competitors.ThustheVisabrandandorganisation
isownedbythebanksthat arelicensedto usetheVisabrandandsystems.Best Westernisabrandandastandard
that individual hotelsbuyinto andthat enablesthemto competewithchainslikeHiltonor Accord.
Aswecanseefromtheabove,theconcept of franchising,eveninthecommercial world,isbroader thanmight
beexpected.But it canbeevenlooser.Whilst all of theabovecansharewhat canbedescribedasaReplicable
BusinessModel (RBM),somefranchisesdo not evensharethis.InItaly,for example,agroupof hairdressershave
formedanassociation,theCompagniadeBellezza.It isamember of theItalianfranchisingsocietythat neither
sharesacommoncorporatebrandor RBM.Itsmemberssimplysharetrainingandsupport systemsandprovide
There are also wider but related developments. Potentiallyconfusingly, organisations in the voluntaryand
communitysector have begun to develop their own approach to social franchising, with organisations like
One World in the UK and manyothers fromEurope and the USA beinginvolved.The British Trust for
Conservation Volunteers (BTCV) has also franchised its Green Gymconcept.
On an international scale, there is an American (Washington DC) based consultancynamed Social
Franchise Ventures whose mission is:
Tosupport non-profit organizationsinidentifyingappropriatefranchisepartners,negotiatingfavourable
relationships,launchingandgrowingstrongsocial franchises.
Social franchisingisalso gainingworldwiderecognition.TheUnitedNationsSecretary-General publishedareport focus-
ingontheroleofco-operativesinpromotingfull andproductiveemployment.Thethirdchapter ofthereport isofpar-
ticular significanceasit highlightsthesuccessoftheLeMat social franchiseasameansofscalingupasuccessful model.
The roots of social franchising
Innovations either develop fromapoint source, e.g. one person invented fire and others learnt fromthis
person, or diffusely. Social franchisingand replication has been adiffuse development in that avarietyof
people came up with asimilar concept at asimilar time. Basicallythis means social enterprise replication
is ashared response to common circumstances and issues.The fact that anumber of people have come
up with asimilar ideais in manyways an indication of the strength of the concept and acommon recogni-
tion of the need for such an approach.
In this section we will look at three factors that have contributed to what might be described as the par-
allel evolution of social franchising.
Social franchisingandreplicationhasessentiallysynthesisedtogether two successstories:theconsortiaof the
Italiansocial co-operativemovement andprivatesector franchising.Theoretically,it isapractical applicationof
systemstheories,particularlythosedevelopedto explaincomplex biological systemsfoundinlife.
Franchising and business growth
Gross Domestic Product (GDP) and therefore business growth is the HolyGrail of all market economies.
Most governments put considerable resources and thought into how it can be achieved.Their perceived
success or failure will largelydepend on their abilityto create economic growth and increase wealth.
Achievingeconomic growthmeansprovidinganenvironment that increasesthesizeof businessesand/or their
number.Policy-makersandbusinesspeopleencourageor put into practiceawidevarietyof strategiesto grow
business,andthesehavetwo mainaims.First,growthof existingbusinesseseither byinternal growth(Tesco
openingmorestoresor providingmoreservices) or growthbyacquisition(e.g.FordbuyingVolvo).Secondly,
increasingthenumber of successful businessstart-ups,creatingamoreentrepreneurial culture.
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Opposites Attract
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Asour societyhasgrownmorecomplex,therehasbeenagrowingrealisationthat suchanapproachisverylimited.
Most of our organisations are reductionist and hierarchical in nature and based on an assemblyline
approach.This approach functions with aleader or manager tellingother people what theyhave to do. In
business, this would equate to the CEO of alarge multinational havingcontrol over the whole organisa-
tion through apyramid of line management.The philosophyof such an approach can be summed up with
the concept of the 'buck stops here'.
Increasingly, this approach is beingseen as inappropriate and incapable of dealingwith highlycomplex
organisations. Manylarge businesses are therefore tryingto move to aflatter management style and give
more responsibilityto staff at lower levels in the organisation.
Analysis of nature reveals that here complexityis dealt with in averydifferent way. Most of us have some-
times looked and wondered at how ahuge flock of starlings can flyin such aco-ordinated and organised
way. Not onlycan theyflyto specific destinations, theycan also respond to changes in wind speed, threats
frompredators and awhole range of other changingvariables.Traditionallywe have assumed that the
birds somehow follow the directions of aleader bird.
Inrealitythereisno leader,thebirdsrelyonself-organisation.Effectivelytheyhaveafew simplerulesthat they
eachuseto control whichwaytheyflyrelativeto their neighbours.Thesesimplerules,inturn,control how the
flock asawholeflies.Thistypeof control systemmeansthat moreandmorebirdscanjointheflock without
control breakingdown,asit woulddo withatypical hierarchical linemanagement approachusedinhuman
organisations.Indeed,not onlydoestheflock continueto function,increasingsizeactuallymeansit getsmore
effectiveintermsof reductionof flyingeffort aswell asprotectionfrompredatorsandother threats.Thuseach
birdintheflock benefitsfromthegrowthof theflock andavirtuouscircleiscreated.
Inlivingorganisms,suchanapproachisfoundto behow nearlyall natural systems- fromthehumanbodyto ecosys-
tems- work.A few simplerulesareput inplaceandthesethenguidethebehaviour of thesystem.Suchruleshaveto
evolveso that theybenefit thewhole.
We believe that if correctly developed with the correct rules, social franchisingputs into practice
the lessons we can learn fromnature.This will enable us to create complex and effective enterpris-
es that, like the flock of birds, are not limited in size by organisational constraints.This way they can
actually become more effective, not less, as usually happens in hierarchical structures as they grow.
That's probably enough of the theory, but we hope that it shows that social franchisingis not an
isolated idea. It has roots in proven business models and resonates with systems theory, perhaps
one of the most important theoretical developments in the last 50 years.
So now let's look at the key ingredients of establishingasocial franchise.
eachother withpeer support - thisisvirtuallyoperatingalongthelinesof amutual societyor asecondaryco-
operative- anincrediblysuccessful and'undersung' businessmodel.
Italian Consortia
Social enterprises,or social co-operatives,havedeveloped in quiteadifferent wayin Italy.Social co-opera-
tivescometogether in consorzi or federations,which then often initiatefurther new enterprisesthemselves.
Thisisin contrast to other countries,for exampletheUK,wheresocial enterprisedevelopment largely
involvesone-off developmentssupported bysocial enterprisedevelopment agenciesor general businesssup-
port.Theconsortiumapproach hashelped Italygrow thelargest social enterprisesector in theEU.
Consortia, of which there are approximately200, are second-level co-operatives whose members are
other social co-operatives.Theyare generallycreated at provincial or regional level and their member co-
operatives mayin turn run anumber of enterprises in order to supplyservices and promote the develop-
ment of the sector.Their main functions are:
to provide shared services like accountingand legal advice, at alower cost
trainingand advice
to co-ordinate and manage contracts too bigfor individual co-operatives
to negotiate loans and preferential conditions
to promote and develop their members
to provide alobbyingand voice function
to promote innovation and experimentation to improve and develop members' services
Theconsortiafulfil astrategicallyuseful roleinenablingthesector to grow,without individual co-opsexpandingbeyond
their capabilities.Rather thanco-opsconstantlytakingonnew contractsandbroadeningout further their corecompe-
tencies,aconsortiumcanassist withthecreationof spin-off co-ops.Inthisway,theco-opsremainat asizewhich
allowsmembersto continueto identifywiththemandbeproperlyinvolvedinmanagement andpolicydirection.
In manyways, consortiaenable Italian social co-operatives to overcome manyof the barriers to growth
faced byUK social enterprises that we have outlined earlier.
Many territorial consortiabelongto national consortia. One of themis CGM (Consorzio Gino
Mattarelli) which has also created asocial franchise called ComunitSolidali which supports and
develops care co-operatives.This social franchise has created the new trademark 'Welfare Italia'
which we will refer to later.
Systems theory
We live in increasinglycomplex societies with correspondinglyincreasinglycomplex organisations.
Traditionally, the dominant organisational model for societyhas been based on the reductionist cause-and-
effect approach of Newtonian physics.
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4.Key principles of social franchising
Successful social franchisingrelies on aset of fundamental principles.These are:
1. Adoption of suitable sectors of the economyto colonise
2. Replication of asuccessful proven business and social enterprise model
3. Injection of qualitybusiness support, financial backing, time and money
4. Pickingthe 'right' people and organisations - findingthe 'entrepreneurial manager'
5. Understandingwhat the keycomponents of replication are (geography, brand, systems, product,
approach).What is the social franchise offer?
6. Clarityof relationship constantlyand clearlycommunicated - the abilityto enshrine mutuality
7. Creation of businesses where increase in size is amutuallybeneficial
We will now go on to discuss these principles in more detail and highlight examples of how theyare put
into practice.
4.1Adoption of suitable sectors
Successful social franchises have so far tended to be
in sectors of the economywhere:
There is agrowingmarket or need - i.e.
the social franchise is not a'me too
business'. It is enteringthe market to
service either growth, or anew social
enterprise niche.
There is somethingformulaic about the
sector, either in terms of aspecific
product or service, or in the wayit is
regulated. Essentially, we are lookingfor
sectors that can easilybe systemised.
It is easier to expose the social enterprise advantage - health and social care, environment
and fair trade are obvious examples of areas where this is true, but theyare onlythe tip of the
iceberg.
Capital requirements are low or there are particular opportunities for social enterprises to
generate capital investment. Despite the policyinterest, the social enterprise sector is still
relativelysmall and generallylacks access to quick and significant investment capital.Therefore
adoption of sectors that require, for example, aroll-out involvinggood retail locations on a
high street in everytown within 5 years, are possiblyto be avoided. Entrythresholds into
markets, particularlyin terms of capital, are keyhere.
StevenByersMPspeakingat theCoRE launch
4.Key principles
of social franchising
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Case study illustration 2
VillaVgenut!('Wayout!') isspreadingtheconcept ofhalfwayhousesfor recoveringdrugaddictsacrossSweden.
Thetwo existinghousesinGteborg,eachhousingeight people,areactingasmodelsfor othersshortlyto openin
rebro andSundsvall.Fiveothersareinthepipeline,andwith15houses,thesystemwill beself-sufficient.
The first halfwayhouse was established in 2003. It has operated successfullyever since, and has
provided the template for the replication process.
CASA hasbeenbuiltonthesuccessfulaward-winningmodelofSunderlandHomeCareAssociates.Establishedin1994,SHCA
featuredthetrackrecordtoallowCASA tobuilditsnetworkwiththeconfidencebornofprovenmarketsandsystems.
For Let Mat, the successful hotel chain was built on aconcept developed over two decades ago.
Twentyyears ago, five youngwomen started ahotel in Trieste.Theywere members of Il Posto
Delle Fragole (atype B social co-operative), which consisted of youngpsychiatric patients, drug
addicts, doctors, and volunteer members.
CoRE, asocial franchise workingwith communities to set up community-owned renewable energy
systems, has been established in the North East of England with government fundingand is devel-
opinganumber of business ideas. However none has yet been established and there is not as yet a
proven model.The undoubted value of settingup apilot community-owned renewable energysys-
temand waitingtill this was aproven success had to be considered in the context of the following:
1. The pace of development is extremelyfast;had CoRE waited, the opportunityfor to
enter arapidlyexpandingmarket would have been lost;
2. Some renewable energysystems take averylongtime to establish;wind turbines can
take over ten years frominception of the ideato commissioning;
3. CoRE is developinganumber of types of renewable energysystems (e.g. biomass and
wind) and doesn't have afixed model that it is replicating(like Le Mat).The lessons
fromone type of renewable energysystem, such as awind turbine, are useful, albeit to a
limited extent, for awood heatingsystem.
CoRE is usinglessons learnt fromother community-owned renewable energysystems fromwithin
the UK and across Europe to tryto limit the impact of not havingaproven model. It hopes to
minimise this weakness bygeneralisinglessons fromother social franchises and bydesigningthe
first business with aview to replication fromthe outset.
Whilst thisisinevitablymorerisky,wehopethat thelessonswelearnfromother social franchiseswill besuffi-
cient to overcomesuchrisks. Case study illustration 1
Care &Share Associates Limited (CASA) delivers personal and home care services (see appendix
1). It provides agreat example of this first keyprinciple, and indeed all of the others! CASA want-
ed to grow viasocial franchisingas:
1. The market for homecare in the UK is set to grow rapidly
2. Home-careprovidersarehighlyregulated,andthereforethesector lendsitselfto formulaicsolutions
3. The employee ownership model sits well in asector characterised bylow payand poor
terms and conditions of employment. CASA's social enterprise 'Better Business Model'
of incentivised stakeholder staff results in:
better pay
better terms and conditions
increased investment in training
lower staff turnover - an average of 3%to 5%across SHCA and the CASA
replication units as opposed to 30%in the private sector. Such alow staff
turnover leads to improved continuityand qualityof care;
acommitment to local recruitment andtrainingwhichaddsto thestockofcare-workers
service redesign
'owners' workingat the coal face
wealthcreated islikelyto bespent inthecommunity;thiscontributesto a
holistic approachto well beinginthat it addressesthefact that povertyand
healthareintrinsicallylinked;
finally, home care is not capital intensive, just labour intensive.Therefore the
financial cost of entryinto the market place is not huge.
4.2 Replicate a proven model
Significant effort must beput into carryingout arigorousduediligenceexerciseonthesocial enterpriseproposition
that isto bereplicated.Keyissuesto consider are:
financial sustainability
track record
staff skills and commitment
market analysis
However,therearenew andemergingmarkets,suchasrenewableenergy,inwhichalengthydelaywhilst the
pilot isbeingprovencouldmeanthemarket opportunityislost bythetimethepilot isproven.Insuchcases,the
businessmodel isdevelopedandestablishedfromtheoutset to beafranchiseandto bereplicated.
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4.4 Find the entrepreneurial manager
Social franchises make it much easier for social entrepreneurs, be theyindividuals or existingsocial enter-
prises wishingto grow in new markets.Theyprovide acredible and proven business model, practical sup-
port frompeople who have run the business and access to trainingand arange of other expertises and
resources.
Whilst this provides asignificant head start, it still means that individuals and hosts for new social fran-
chisors do have to be carefullyselected for aptitude and motivation.
Indeed research bythe British FranchisingAssociation found that franchisors felt that the biggest barrier
to the growth of their franchise was the lack of suitablyentrepreneurial franchises.
Establishment of asuccessful social franchisenetwork thereforerequirestheidentification,engagement and
incentivisationof host organisationsandmanagers.Thisreallyisatrickybalancingact intwo ways.
First istheissuethat each unit will requireastrongand focussed entrepreneur who isat thesametimewill-
ingto conformto somelevel of businessformatting.Therecan,on occasions,beaconflict here.
Secondly,thefranchiseunit might bedevelopingin partnership with ahost organisation.Unlesscareistaken
at thestart of therelationship,thereismuch scopefor confused linesof management and accountability.
Unit managersof social franchises(and host organisationsif appropriate) should beincentivised to perform
to targetsset bythereplicatingsocial enterpriseor social franchisor and,if possible,financiallyparticipatein
theownership of theunit.
4.5 The key components of social franchising
To cut to the quick, there needs to be somethingnot only worth replicating, but somethingthat has a
value - an offer that is worth buyinginto.This can be:
1. Name and identity
Is it distinctive, memorable and registerable?
2. Unique perceived benefit
Can it be differentiated fromother businesses?
3. Market opportunity
Are the market conditions right?
Can the business be run on aterritorial basis?
4. Commercial viability
Can it offer predictable sales levels?
Is there enough profit for both franchisee and franchisor?
Is it financiallyfeasible?
Casestudyillustration3
CASA hasreceivedsignificant backingfrombothEQUAL (EuropeanSocial Fund),andSunderlandHomeCare
Associates.Inaddition,eachreplicationunit hascost inexcessof100,000to establishandto reachbreakeven.
TheCDFI,Co-operativeandCommunityFinanceLimited,hasalso been'alongsideCASA' to meet someofthe
workingcapital requirement.
CASA also featuresastrongandentrepreneurial management teamwhichdrawsonbothcaresector andsocial
enterpriseexpertise.At times,CASA hashadto providesignificant hands-oninterimmanagement andadditional
resourcewithintheunitsto ensuretheysucceeded.Without all oftheseelementsinplace,CASA wouldnot
haveprogressed.
LeMat hasdevelopedafour-volumemanual for itsmembers,extensivetraining,groupmarketingandstaff
exchangesto promotestandardswithintheLeMat social franchise.Thishasbeenrecognisedbypreviouslyinde-
pendent social enterprisehotelsasbeingextremelybeneficial.LeMat,therefore,hasgrownnot simplybyestab-
lishingnewhotels,but byexistinghotelsjoiningthegroupandthushelpingit growmuchmorerapidly.
It isimportant to notefromthisthat asocial franchisecangrowbyincorporatingexistingbusinesses,onceit is
established,aswell asbyestablishingnewbusinesses.
IndeedWelfareItalia,whichhasbeendevelopedasasocial franchisenetworkofcareproviders,hasgrownlarge-
lythroughpreviouslyindependent careco-operativesjoiningthegroup.
4.3 Injection of quality support and finance
It is important not to underestimate the level of development resources required to establish both fran-
chisors and franchisees. Fromour experience and research, it can take up to five years to establish afully
workingand sustainable social franchisingnetwork. Social franchisingand replication are long-terminfra-
structure projects, and cannot be constrained byshort-termfundingregimes.Theyare not quick fixes.A
significant amount of workingcapital is aprerequisite to give anynetwork achance of success.
In addition,it isalso important to notethat thefranchisor needsto havetheskillsand capacityto managea
network of social franchiseunits,rather than 'simply' beingasocial entrepreneur.Theskill set needed isin
part different,and in addition to beingmission-driven and innovative,also needsto focuson 'managingman-
agers','lettinggo',strategic planningand qualityassurance.Thisisabigask for somesocial entrepreneurs.
It is also important to note that the abilityof asocial franchise to provide such alevel of support, which
could not be supported byasmall number of franchisees, is highlyvalued byindependent operators. Best
Western is an example of how independent hoteliers have established anetwork or secondaryco-opera-
tive to promote their services as agroup in awaythat theycould not do individually.
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One of the harder parts of developingasocial franchise model is the need for the franchisees to not only
buyinto amodel, but also to buyinto aphilosophyor asocial mission that will require an ongoing
resource and commitment to achieve.
It wasimportant that anyfranchisingoperationtook onboardthephilosophybehindHiddenArt -
tappingintolocal resourcesandputtingtheseresourcestotheir best creativeusetobenefit designers
andlocal communities.Thefact that anyprofit madebyHiddenArt hastobereinvestedinthe
companymeant that a franchisewouldhavetoreflect thesocial natureof our operations.- Dieneke
Ferguson,Chief Executive,HiddenArts
One waythis can be clearlysignalled to all concerned is to allow alevel of reciprocal ownership between
the franchisor and the franchisee. Bywayof givingup some ownership and control of the umbrella, the
original and foundingfranchisors are communicatingboth to the franchisees and the outside world, that:
alimitedreturnisbeingmadeonthelabour of others
that returnisbeingusedto further thesocial andcommercial objectivesof thesocial franchisenetwork
Clearlyreverse safeguards also need to be put in place to stop the franchisees takingoverall control and
'carpet-bagging' or destroyingthe original social purpose of the network, whilst allowingenough stake-
holdingto be credible.
This two-wayrelationship needs to be more than simple window dressing, and gets to the heart of what
is tryingto be achieved.This is the use of abusiness development model to build astronger social enter-
prise sector through:
market dominance and increased market share
economies of scale
buildingcredibilitythrough scale, success, workabilityand deliverability
labour mobility
shared and incentivised research and development
buildingadynamic sector through shared involvement/ownership
In terms of quality, it is vital that the social franchisor can quicklyidentifyand react to social franchisees
that maybe failing. One bad apple can have serious implications for the whole social franchise. Soft meth-
ods, such as encouragement of the interchange of staff and shared trainingsessions, can help identify
potential problemsocial franchisors. In addition, hard measures are also needed and these will doubtless
include traditional measures of business success, such as turnover and profitability. But theyalso need to
include qualitymeasures that address the social return of the social franchisor and go deeper.Thus, for
CASA, akeymeasure is staff turnover, which is awell-established marker both of qualityin care provision
and also of abusiness that is beingwell-run and benefittingboth staff and users.
Case study illustration 4
All our case studies clearlydemonstrate the importance of the above principle. Each clearlysets
out what its franchise 'offer' is, and then maintains aclose, but flexible, 'fit' to it:
For Le Mat, it is a3-star hotel close to the centre of amajor town or cityoffering
between 30 and 60 bedrooms;
For Vgen ut! It is halfwayhouses of asimilar size (around eight places), operatingwith
the same house rules, sharingthe same co-operative legal structure;
For CASA it is ahome care unit deliveringat least 800 hours aweek of home care,
featuringemployee ownership at its core.
Whilst CoRE does not have afixed business model, dealingas it does with arange of types of
renewable energy, it does have averyclear brand as well as the necessaryexpertise and perhaps
most importantly, credibility.This credibility, most clearlydemonstrated bythe CoRE brand, is ben-
eficial to communitygroups when dealingwith funders and local planningauthorities, but also
when purchasingequipment and makingagreements for grid connection.
5. Credibility
Does beingamember of the franchise enhance the credibilityof anew start?
Does it bringatrack record that will impress funders, purchasers and others?
If there is nothingworth buyinginto, initiallyor on an on-goingbasis, the social franchise network will
simplyfall apart.
4.6 A clear and mutually beneficial relationship
Finally,oncethe'offer' hasbeenidentified,thereneedsto becompleteopennessandclaritybetweenthefranchisor
andthefranchisee,withregardto who isgoingto exchangewhat andwhen.Oncethat exchangehastakenplace,
clarificationwill beneededonwhat will betheformof theongoingrelationshipandhow mutual benefit will be
writteninto theagreement.
Without clear communication,it couldbeeasyfor inherent structural tensionsto developbetweentheparties.
Thereforeat theverystart of therelationship,thefranchiseemust bemadeawareof:
thebasisof thecommercial relationship
what theongoingfinancial commitment will be
what theycanexpect to receivefor their money
anybreak out/buyout clauses
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4.7A business where more social franchisees benefit all
Social enterprisereplicationandfranchisingaremethodsofrapidlyscalingupparticular brandsandbusinesses.Suchscal-
ingupmust beintheinterest ofboththehubandtheunits,intermsofachievingone,some,or all ofthefollowing:
brand awareness
economies of scale
career progression routes
better procurement opportunities
improved margins and profitability
shared services such as R&D
Thisisacrucial area,for if thiscriterion isnot met,thedriveto grow thesocial franchisewill beseverely
constrained and thewholepurposeof settingit up isput into question.Thealignment of franchisor and fran-
chiseeon thisissuetogether with amutual interest in growth,aswith theflock of starlings,isakeyfactor.
Case studyillustration 5Continued
Aswell asbeingsupportive,suchanapproachfostersacommonethicamongst franchiseesandpromotesthe
attainment of commonvalues.
Vgenut!hasdistilleditsknow-how into aset of four keydocuments:
thehandbook
thequalityhandbook
thepreliminaryfranchiseagreement
thefinal franchiseagreement
Case study illustration 5
Again, all the case studies featured in this guide offer some formof business manual that sets
out precisely how to operate the business, and what the relationship is between the franchisor
or hub and the individual unit.
For CASA,thethreekeydocumentsaretheprospectus,thebusinessmanual andthelicenceagreement:
Theprospectussetsout in broad termswhat thefranchiseoffer is,how much it
costs,and what potential unitsneed to do in termsof businessplanningfor aviableunit;
The business manual sets out in detail all of the policies and procedures required to
establish and run aCASA home care unit.This manual is not made available until
the CASA licence fee has been paid;
The licence agreement sets out the legal relationship between CASA and its units.
Inorder to foster amutuallybeneficial relationshipwithitsreplicationunitsCASA hasestablishedtheCASA
'panel'.Here,all unitsget thechanceto shareexperiences,get involvedintrainingandprofessional development,
andof courseto havesomefun!Thepanel also hasthefunctionof electingtwo of itsownmembersto represent
theunitsonCASA'sboardof directors.
Thepanel isthewayinwhichtheCASA Groupreallyarticulatesitsvoiceto policymakersandtheoutsideworld
- to becomethedemocratisingforceof thehome-caresector.
InLeMat'scasetherearefour manuals:
Thehotel franchisingof social entrepreneurs:Why,what,who andhow - thelegal andethical frame
work of franchising,social co-operativesandtheLeMat Association
Workers' andentrepreneurs' self-determinationandself-management,careersandempowerment in
LeMat social enterprises- discussesthesocial andemployment issuesinvolvedinrunningasocial
hotel
TheLeMat hotel - givesadetaileddescriptionof what qualityof serviceto aimfor - fromcheck-in
to complaints
Exercise:how to prepareabudget - takesthereader throughtheprocessof choosingpremisesand
preparingabusinessplan
LeMat andmanyof theother social franchises,encourageandsupport theinterchangeof staff betweenfran-
chiseesasameansof fosteringasharedsenseof commonidentity.Workers,andinparticular managers,insocial
enterprisecanfeel veryisolated.Theopportunityto feel part of alarger movement,to sharemeansof addressing
issuesandto beableto call uponsupport fromthefranchisor or fellow franchiseescanbeextremelyvaluable.
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5.Why social franchising
works for social enterprise
Case study illustration 6
OptionC isacar sharingsocial franchisethat hasset uponeclubwithanother openingshortly.Asthefranchise
grows,theopportunitiesfor eachcar clubto providemorefor itsmembersincrease.Theycanincreasethe
rangeofcarsavailable,bysharing,betweencar clubs,lesscommonlyusedmodelslikepeoplecarriers.Members
canaccesscarsinmorelocations:for instancemembersfromNewcastlecantravel to Durham- or even
London- bytrainandaccessacar there.Increaseinsizeandcredibilityalso enablestheclubsto provideother
benefits,suchasnegotiatingreducedratesonpublictransport or providingcyclehire.
Organisationallyeachnewclubincreasesthestrengthofexistingmembersbyenablingthewholeorganisationto
negotiatebetter dealsonbuyingcars,byreducingsharedcostsofbrandingor administratingbookingsandby
increasingtheabilityofeachcar clubto meet demandbyholdingafloatingstockofback-upcars.
For WelfareItalia,oneofthekeyfactorsisthestrengthofthesharedbrand.Themoregroupsthat jointhegroup,
thebetter knownit becomesandthemorevaluablethebrandbecomes.However,moremembersalso means
moreopportunitiesfor thebrandto bedevaluedbyapoorlyrunmember.
ComunitSolidali ensureshighqualityfor itsWelfareItaliabrand.It hasthereforefixedstrict membershipcriteria
and,to measurequality,hasestablishedanindependent evaluationteammadeupofhighlyrespectedacademics
andothers.Thegrouphasalso establishedanethical andscientificcommitteeto bethefinal arbiter ofwho can
andwho cannot becomeamember.Intheend,thereal test ofthisisthefact that aspirant membersarereject-
ed.In2006,six applicantswererejectedfrommembershipandsevenwereaccepted'withreservations'.
Rt HonSir MenziesCampbell CBEQCMPvisitingDurhamCityOptionCCar Club
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What these businesses show is that here, the type of mutual (in the sense of seekingto benefit all rather
than some) value-based approach to enterprise is actuallywell suited to franchisingand vice versa.
Suchanapproachisbest implementedbysocial enterprisesthat areenterprisingandwhosepurposeisto enhancethe
commongood.Theyseekto changeand/or improvesociety,not simplyto maximiseprofitsand,asaby-product,benefit
society.Social enterprisesseekto increasetheir impact andsocial franchisingisaveryeffectivewayofdoingthis.
For manypeople involved in social enterprise, issues of scale are of vital importance. Manybelieve that to
be effective, social enterprises cannot grow too large.Whether or not this is always true is debatable and
hotlycontested. But what is clear is that there are some social enterprises for whomastronglink to the
communitytheyserve is vitallyimportant - in terms of governance (makingsure the enterprise does what
is required), marketing, and accountability. Small scale is also widelyacknowledged to enhance responsive-
ness, flexibilityand often efficiency.
Take for example CASA and its home care services. Here, as we have seen, Sunderland Home Care
Associates recognised that its approach would not work if it simplyexpanded and became North East or
UK Home Care Associates.
A similar recognition drives the development of Italian consortiaand manyother social franchises.
One of the keybenefits CoRE brings is that it is settingup renewable energysystems that are owned by
and benefit the communities within which theyare located.This is both morallyright and commercially
verypowerful.The biggest hurdle to establishingrenewable energysystems is communityopposition.
Clearlythis is much reduced if the communities own the renewable energysystems and benefit substan-
tiallyfromthem.
However, scale is still important. Often it is politicallyimportant in terms of credibilityand lobbyinginflu-
ence. It would be naive to assume that large companies or agencies survive simplybecause theyare more
efficient. In reality, often theyare not. Small social enterprises are at ahuge disadvantage here as theylack
political power.There are of course, some real economies of scale (though often theyare overstated and
assumed rather than proven). Larger organisations can afford to develop abrand or employand access
specialist support, whereas smaller enterprises cannot.
Comingback to CASA,thebrandnameof SunderlandHomeCareAssociateshasbecomeveryvaluablegiven
thesuccessof theorganisation.Equallyimportant,thereareahugenumber of legislativeandprofessional issues
that anyprovider of homecareneedsto deal withandbeproficient in.SHCA will benefit bybeingpart of afed-
erationof providerssharingthecost of maintaininganddevelopingthebrandandof remainingcompliant with
current legislation.But for thosewishingto set upanew homecareenterprisesuchsupport isnot simplyhelp,it
isessential andwouldbeveryhardto provideinanyother way.Thefounder of SHCA,Margaret Elliot,isvery
clear that shewouldfindit impossibleto set upaSHCA inthecurrent legislativeandcommercial climate.
5.Why social franchising works for social enterprise
Social franchisingis amodel that we think can have major benefits for social enterprise development as
well as wider society. In this section we will look abit more deeplyat whywe feel this is.This does mean
abit more theory, but we hope that an exploration of what social franchisingcan achieve, and why, might
help you understand it and use it better.
Onfirst hearing,social franchisingsoundslikeaninherent contradiction.Of coursefranchisingasabusiness
model hascomealongwayandmanyof itsmoredisreputableaspectshavedisappeared.To manypeople,how-
ever,it isstill oneof themost cavalier andaggressivecapitalist businessmodels,andonlyonestepremovedfrom
pyramidselling!
So how canwetalk about franchisingbeingsociallybeneficial andrelevant to social enterprise?
Inrealitynot onlyissocial franchisingapplicableto social enterprise;webelieveour approachto franchisinghas
potentiallymoreto offer social enterprisethanconventional franchisinghasto privateenterprise.It mayevenbe
morestructurallyappropriate.
Thereasonfor thisisthat at theroot of all successful social enterprisesistheabilityto createmutual benefit.
Privateenterprises,whosefundamental purposeisto maximiseprofits,do thisbyseekingto createmonopoly
situationsto maximiseprofits.Of course,whilst privateenterprisesdo co-operateandwork together,their drive
to maximiseprofit,andthusbecompetitive,inevitablywinsout.A privatesector franchisemayfunctioneffective-
lybecausethemutual benefit betweenfranchiseeandfranchisor issufficient to constrainthistension,but the
desireto maximiseprofitsandcompetewithother businessescreatesadestructivetension.Bothfranchiseeand
franchisor seek to gaintheupper handandmaximisetheir profit at theexpenseof theothers.
Of course franchisingstill works for private enterprise but, as we have seen, pure private enterprise brings
with it problems that inhibit the effectiveness of franchising.To overcome these, it is interestingto note
that some franchises have become more like social enterprises.Thus the BodyShop has averyvalue-
based approach compared to most private enterprises and Visacould equallybe described as asecondary
co-operative, as in fact could Best Western.The followingis taken fromVisa's web site
(www.corporate.visa.com/av/about_visa/corp_organisation.jsp).
Visaisnot atraditional multinational corporation.Visahasanorganizational structurewhereby20,000
member financial institutionsarebrought together throughtheVisaAssociation.Thesepartnershipswith
financial institutionsaroundtheworldallowVisatomeet theneedsof local marketsandtobenefit from
economiesof scale.Thismodel alsoallowsVisatoadapt productsandservicestolocal cultureandcustoms,
whichinturnallowsVisatomeet theneedsof buyersandsellersineachmarket.
Thisdecentralizedregional structurehasbeena keyelement of Visa'sgrowthandcontinuestodeliver
theflexibilityandresponsivenessthat today'shighlycompetitivemarket demands.
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As we have seen, private sector franchises often need to be based on tightlydrawn up agreements to
ensure cohesion and that the franchisor gets his or her financial return.A social franchise need not be so
restrictive and can allow for greater freedomfor franchisors to respond both to local markets and to
their own strengths.
For example, an Option C car club in one areamight take an opportunityto provide members with a
public transport discount whilst in another areait might offer cycle hire.
This abilityto innovate locallyand tryout new ideas is ultimatelyagreat potential strength. Innovations
can be developed byone member and then disseminated through others.
A looser relationship also adds interest to the offeringof the individual franchises.Thus, users of Le Mat
hotels will come to expect acommon standard and approach but, unlike amongNovotels, local varia-
tions are encouraged. For example local architectural and cateringstyles are encouraged and will pro-
vide interest.Whilst commercial franchises often lead to uniformglobalisation, asocial franchise can
benefit fromsupportinglocal variations.
Indeed, as we have seen with the examples of CoRE and VIVA, it becomes possible to consider afranchise
that does not have aspecific RBF or manuals as with the example of the Italian hairdressers. Here the
franchise is about ashared brand and asharingof resources, knowledge and expertise which can be used
to support avarietyof business types - for example with CoRE one communitymight be best served bya
biomass heatingsystem(e.g. wood boiler) whilst another might benefit more fromawind turbine.VIVA
might work with agroup of nurses or it might be dentists to set up an employee-owned health provider.
The other major benefit of social franchisingis that it develops aself-sustainingbusiness support mech-
anism- one that is specific to social enterprises and to aparticular trade sector.What is more, it is also
market-driven. Compared to conventional business support, it ensures that support is only provided to
people and organisations that are likely to successfully establish afranchise that will be profitable.
If the franchisingorganisation does not achieve this it will eventually die, because it survives on the
income (ashare of the profits or turnover) derived fromits stake in the franchises it helps set up.
Whilst this may appear quite hardnosed and can be off-puttingfor some, in most cases it is viewed pos-
itively. People regard the fact that the franchisor takes astake and has an interest in long-termprof-
itability as an expression of commitment that they value.
In cases where the social franchise is owned by the franchisees it establishes, the other great advantage
of this type of business support is that the social franchises are empowered to control the business
support on offer and to ensure it is fit for purpose.
Similarly, ComunitSolidali, through its Welfare Italiabrand, has provided asimilar and proven benefit to
its membership of 46 mental health care providers in Italy, even though the regulation of care provision
is much more varied in amore decentralised country.
Thus social franchisingallows social enterprises to gain scale and benefit fromreal economies of scale
and economies of political power. In this regard, credibility is often one of the major benefits.
CoRE has found that its involvement in acommunity renewable energy project greatly increases the
credibility of ascheme with funders and other agencies.Whilst havingastrongbrand and extensive
track record would be expected to have this effect, CoRE has not yet attained either of these. Simply
beingaregionally based professional organisation is sufficient to have an impact on many.
Scale in terms of beingpart of larger more credible organisation does bringmarketingadvantages.This
is particularly so with the procurement of services and goods by the public sector. Here the contractual
arrangements of procurers, which may not relate directly to the provision of quality care (e.g. levels of
insurance, membership of particular associations and so on) and their desire to limit the number of
organisations they procure fromcan make it very difficult for social enterprises to win contracts. Being,
effectively, part of alarger federation overcomes many of these problems and increases the chances of
asocial enterprise winningaplace on alimited tender list.
Social franchisingtherefore allows social enterprises to retain their local roots and be effectively
governed locally without losingthe benefits of scale and political influence that larger organisations
often have.
Social franchising, and the federation of the social franchises into acommon organisation, thus poten-
tially allow social enterprises to compete with large public and private sector providers, which other-
wise might well be impossible.
This benefit, together with the fact that social enterprises are value-driven, i.e. they have asocial pur-
pose, means that there are additional and arguably more powerful drivers that makes social franchising
hangtogether.They share acommon:
desire to increase their profitability
set of values and social purpose that are more easily attained as part of afranchise
understandingthat without the franchise the franchisees would be unable to compete
The greater cohesion and mutualityof asocial franchise has one major additional benefit.This is that, just
as with Visaand BodyShop, the stronger the mutual benefits fromafranchise, the looser bureaucratic sys-
tems can be.
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6.Issues for social franchising
Social franchisingis at an earlystage of development and, as one might expect, there are anumber of
issues that have not been resolved, but need to be considered when settingup asocial franchise. Our
work has identified the followingareas of debate:
1. intellectual property
2. ownership of the franchise
3. quality
4. price of the franchise
5. membership fees
6. venture development
7. cross-cultural issues
6.1Intellectual property
Commercial franchises jealouslyguard their intellectual propertyand require potential franchises to sign
confidentialityagreements to ensure that others cannot, for example, access their manuals for free.The
franchise has created valuable information that others should have to payfor, and that could aid competi-
tors if theywere able to freelyobtain it. Some social franchises follow this approach.Theyfeel that they
are maximisingincome fromintellectual property(IP) theyhave created and are minimisingthe risk of
aidingcompetitors.
Such an approach mayalso be seen to protect the investment and interests of the franchisees.Theyknow
that onlytheyand other franchisees can use the IP that theyare likelyto have contributed to developing.
The countervailingargument is one we describe as the 'Open Source' argument which refers to the Open
Source movement - principallyin computer software where software, such as Linux, is made freelyavail-
able.Those that hold this view believe that:
1. Social franchisesarecreatedto helpdisadvantagedcommunitiesor to solvesocial problems,
sometimeswithpublic money.To limit accessto thisknowledgeisthereforeregardedasimmoral.
2. Makingtheir intellectual propertyfreelyavailableallowsfor asharingof knowledgeanda
shareddevelopment of methodsthat benefitsall,includingthecreator of theintellectual property.
3. The actual value is not in the IP, but in the abilityto use the brand name, which members do
have to payfor, together with the expertise to properlyimplement the knowledge.Without
this expertise or the use of the brand name, the intellectual propertyis of little benefit
4. It isrelativelyeasyto restrict theuseof abrand nameand accessto theexpertisecontained
within asocial franchise,but often quitedifficult and often verycostlyto restrict accessto IP in
whatever format it is.Manypeoplehavefound,for example,that patentsand copyrightsareonly
asstrongastheorganisation that holdsthem.A patent without theresourcesto go to court to
protect it isvirtuallyuseless.
6.Issues for social franchising
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turnover of members and on the turnover of staff. Falls in financial turnover or increases in staff
turnover provide an early warningthat amember company may be havingdifficulties.
All members also need to be on the lookout for poor performance within the social franchise and
to have mechanisms to deal with it; this may involve an element of peer support.
Enforcingqualitycan be an issue that creates tensions. Experience shows that if asocial franchise is mutu-
allyowned, member companies are more protective of their franchise and more willingto enforce more
rigorous standards than if theyare imposed upon them.
Member social franchises are often involved in settingand measuringstandards across the group to main-
tain the value of the brand and social franchise.This can be done, as is the case with ComunitSolidali, by
havingstandingcommittees and other systems to maintain what it describes as astate of a'healthyten-
sion'.This can result in acontinuous improvement in qualitybyhelpingit to compare its experiences with
those of other similar organisations.This helps to get new ideas and enables interaction with external
bodies that can give an impartial opinion on what aspects need to be addressed. Simple networkingand
staff exchanges, as practised byLe Mat, is another example. Indeed, amanual can onlytransmit so much
information, and byinterchangingstaff and sharingexperience all members can be helped to reach certain
standards.
Thus, with CAP Markets, the franchisor provides the franchisee with additional staff and support during
the launch period, acrucial period for anybusiness, but particularlyfor supermarkets.
6.4 Price of the franchise
In acommercial franchise, the franchisee typicallypays alicence fee upfront to the franchisor, followed by
aregular amount based on turnover or profits.
One of the keyissues in social franchisingis that in much of Europe, asocial enterprise is set up to pro-
vide work for disadvantaged groups.There therefore seems somethinginherentlyproblematic in charging
disadvantaged people to join asocial franchise and indeed take aproportion of their profits or turnover.
Inmost cases,however,social franchisesdo not chargeafee,or if theydo,it isusuallyquiteasmall amount
and normallycoversset-upcostsof thesocial franchise,intellectual rights,etc.(e.g.manualsand brand names).
As with anybusiness, there are start-up costs and these can be substantial. However, usuallythe franchisor
helps the franchisee understand these costs and theywork in partnership to raise them.
If afranchiseisto besustainable,it must cover itsrunningcostsaswell asgeneratingasurplusto payfor
development activities.To do thisall social franchisespaymoneyto thefranchisor.Thisfundsthefranchisor
to set up morebusinessesand providethefranchiseeswith shared servicessuch astrainingand marketing.
5. Makingintellectual propertyfreelyavailable can actuallybe financiallybeneficial. Provided the
social franchise is recognised as the source of information, as per Open Source protocols, such
an approach has proved to be averyeffective marketingtool.When manypeople see manuals
and other documents, theyrecognise that implementingthemwithout support is beyond their
capabilities.Theyare therefore more likelyto join the social franchise, rather than less, as they
want to get this support. For example, CoRE has apolicyof activelydistributingthe renewable
energymodels it develops.This then creates publicityand awareness of CoRE and, it is felt, will
not onlyenhance its credibility, but also make more communities wish to work with CoRE. Of
course, some communities will use these models on their own without involvingCoRE. But the
numbers are likelyto be small and these communities, if theyhave the skills (which are not
inconsiderable) to do it themselves, probablywould not have involved CoRE anyway.
Overall wewould generallyseetheOpenSourceapproachasideal.However,werecognisethat insomecir-
cumstancesand for someorganisationsthismaybemoreproblematic or,insomecases,too risky.
6.2 Ownership of the franchise
Most of the social franchises referred to here are mutuallyowned bythe social franchisees.The social
franchisees that are established own the franchise as well as the brand, at least in part. However, in some
this is not the case. It maybe that afoundingorganisation or other stakeholders have aformal stake in
runningthe franchise or beingboard members.
We believe that mutual ownership where, at the veryleast, franchisees are the majoritystakeholders, is
the most appropriate and most effective formof ownership. It strengthens the cohesion of social franchis-
es and is best at ensuringthe interests of the social franchisor and social franchisees are closelyaligned. It
also ensures equityand is empowering.
However,wearealso awarethat not everyoneagreeswiththisandthat suchanownershipstructuremaynot
bepossibleinall circumstances.Thesuccessof VillaVgenut! andof CAP Marketsclearlyshowsthat amutual
ownershipapproachisnot essential.However,boththesefranchisesaresociallyownedandthisclearlyisvital.
As we shall see, mutual ownership can offer at least apartial solution to some of the other issues we
will raise.
6.3 Quality
As with commercial franchises, auniformstandard of high qualityis vital. One poor franchisee not only
damages its own profitabilityand effectiveness, but also that of the whole franchise.
The social franchise therefore needs to monitor the quality of all of its members. Often such mon-
itoringwill be in the formof one or two key performance indicators that can be regularly and eas-
ily measured. In the case of CASA, such monitoringis carried out primarily on the financial
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Others argue that if the social franchisor goes on exactingasignificant amount of moneyfromthe fran-
chisee, it maynot put the franchisee under undue financial pressure (particularlyif the return is based on
profits rather than turnover) but it maybe seen as an unfair tax. If the franchisee feels theyare paying
over large amounts of moneyto the franchisor and gettingverylittle in return for it, then this will
inevitablycreate tensions between franchisee and franchisor - which could become verydestructive.The
sense of mutualitybetween franchisee and franchisor could then be destroyed.
This issue also raises questions about whether or not the franchisor should allow franchisees at some
point in time to become totallyindependent of the franchisor or at least, to change the relationship.
As yet, we have not come to afirmview on this and we suspect that is an issue whose solution will vary
between different franchises.This is because of the nature of the business and the views of those involved.
However two points are clear:
1. The financial return fromventure development for the franchisor should normallyexceed
the cost of resources put in to developinganew franchisee.The net return fromall franchisees
should be greater than the resources put into developingthem. If this is not so, the franchisor
cannot grow and become financiallysustainable unless it can find some other sources of income.
2. A mutuallyowned social franchise is more likelyto be able to cope with the tensions
created bythe issue of what is ajust return to the franchisor.This is because the franchisees
are involved in, or in control of (dependingon whether the board of the franchise is exclusively
or partiallymade up of franchisees) settingwhat the return is, and can also change it over
time. Furthermore, as owners of the franchise theycan agree what happens to the profits it
generates and could even decide to paymembers adividend.Though, in such models, the
franchisor has to ensure that it is not drained of the resources it needs to grow.
6.7 Cross-cultural issues
The SIPSprogramme is fundamentallyabout tryingto develop the concept of social franchisingand devel-
opingbusiness models that can be transferred across national boundaries.The question is whether cultur-
al differences and different business environments make this too difficult to achieve.
The SIPSprogramme did find it difficult to develop business ideas between transnational partners. It
became clear that rather than jointlydevelopingideas, it was probablythe case that there was more inter-
est in takingup an ideafromone countryto another.The UK is workingwith Italian partners to develop
acateringenterprise whilst Lithuaniahas worked with the UK on developingacare co-operative. CoRE is
also seekingfundingwith European partners, includingSIPSmembers, to develop CoRE Europe.
This is usuallycharged for through:
ashare of the profits
apercentage of the turnover
afee related to the size of the operation
6.5 Membership fees
The most appropriate method of generatingthis income depends on the nature of the business and what
is most culturallyacceptable.The case studies show awide varietyof ways of doingthis.
Whilst it mayseemthat there can be problems chargingan ongoingfee or takingapercentage of the
income, this is, as we have discussed, avital element of social franchising.Without it, asocial franchise is
not properlymarket-orientated and is not sustainable.We have dubbed this approach 'venture develop-
ment', which we will now discuss in more detail.
6.6 Venture development
The model of social franchisingwe have outlined is aformof what we have called venture development.
The franchisor supports the development of new franchises, usuallywithout cost to the new franchisee. In
this waywhat we are doingis similar to 'venture capitalism', but what we are doingis more about
resources and expertise than capital.The resources beingprovided can be wide-rangingand can include
providingor findingfinancial support as well as advice and access to the intellectual propertyof the fran-
chise. For this we expect areturn and this comes both fromthe growth of the social franchise as well as
fromafinancial return in the formof aproportion of turnover or more commonlyof profits. Choosinga
proportion of profits ensures that the income the franchisor takes does not put the franchisee into finan-
cial difficulties.
This financial return can varyfromafew percent of turnover as with CASA to approaching50%for
CoRE.The amount depends on the type of business beingestablished and the relative amounts of time
and resources beingput in bythe franchisor and franchisee.Whatever it is, it needs to be clearlydefined
fromthe outset both in terms of the amount and the length of time. Indeed, the amount can change over
time and can shift, as CoRE proposes, frominitiallybeingaproportion of profits to ultimatelybeinga
membership fee.
We are conscious that on the one hand some would regard the level of return fromthe franchisee as
beingfixed fromthe outset and remainingat aconstant level in perpetuity. Provided this is clearlystated
fromthe outset, everyone is aware what the deal is and even if this turns out to be asubstantial amount
of money, it is just.
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7.The step-by-step guide
There is clearly some interest in European working.
Within Italy, ComunitSolidali's psychiatric care provision model has been copied across Italy. In such
adecentralised state, approaches to care provision and local legislation vary widely and the Welfare
Italiabrand has coped with this variation.
Le Mat has also developed hotels beyond its Italian homeland in Sweden and is workingon developing
others in, for example, Croatia.
The evidence therefore points to the fact that, like commercial franchises, agood business ideain one
European country is likely to work well in another, despite cultural differences.At the moment, such
differences include the way social enterprises are constituted and organised as well as legislative envi-
ronments.
However, it is clear that agood business ideain one country might not necessarily be strongin anoth-
er. For example, CAP Markets are takingover smaller supermarkets abandoned by the commercial
sector in Germany.This is providingamarket opportunity as some of these sites are abandoned more
as part of astrategic, corporate move to bigger out-of-town premises rather than an analysis of the
viability of individual sites. However, in the UK the commercial sector, and in particular the Co-opera-
tive Group, is beginningto move back to operatingsmaller stores and the opportunity to buy themup
is no longer asignificant opportunity.
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It is important not to underestimate the extratime and resource, often human, that it takes to run the
core business as well as develop and support the franchisees.
Step 4:Build the replication model
Essentiallythis is about creatingasaleable 'product'. First of all, identifythrough structured discussion and
lookingat the competition what preciselythe 'replication offer' is, in terms of:
brand
systems
development support
training
territory
ongoingsupport
cost of bothinitial feeandthenon-goingfeesand/or saleableproducts(withmargins) to theunits
These keycomponents then need to be translated into aseries of documents, including:
aprospectusor brochuredetailingtheidea,thebenefits,theoffer,thecost andthetrack record
the business manual settingout all of the business systems
the legal agreement between the unit and the replication 'hub'. Legal advice should be sought
when preparingthis agreement.A template is available fromwww.sfuk.co.uk
In order to do thisproperly,abusinessplan for thehub also needsto havebeen prepared,which identifies:
the vision and rate of growth
the level of services etc. to be delivered to the units
the ongoingfundingrequirement of the hub
the legal structure of the hub, and its organisational relationship with the units
the precise contractual relationship between the hub and its units
the mutualitybetween the hub and its units
Of course, for some types of social franchise, it is not always possible to include all of the above elements.
For instance while it might not always be possible to produce abusiness manual, the issues the points
above are addressingstill need to be dealt with.Thus CoRE maynot have abusiness manual, but it will
need to produce an alternative, in this case through aone-off business plan.
7.The step-by-step guide
This final section draws on the keyprinciples set out before to provide astep-by-step guide to replication
and social franchising. It is designed for use bydevelopment agencies, social entrepreneurs and social
enterprises who are lookingto expand rapidly.
Step 1:Colonisation
Identifythe'colonisationsector'.Thisisbased onour first keyprincipleasdiscussed insection3.It isnot our
intentionto rehearsetheargumentsagainhere.Wesimplywant to highlight theimportanceof thefirst three
steps- get thesewrong,and therest isawasteof time.Essentiallyyouwant to identifysectorsthat are:
growing, or where the adoption of anew innovation creates asignificant competitive advantage
formulaic in some way
where it will be easyto build the 'Unique Social Enterprise Proposition'
entrylevels are achievable
Step 2:Identify the model
This second step is also crucial. Credibility in the market place can only be fostered if you have a
worthwhile track record. If an existingmodel is beingadopted, then the due diligence spent on it will
not be wasted. If it is anew idea, be prepared to call it apilot, and be patient - track record doesn't
occur overnight!
Step 3:Capacity and the replication team
Whatever type of organisation is involved in replication, it is important to ensure that the development
teambehind the replication has the right set of skills to drive it forward.These include:
vision, drive and motivation - basicallytheyneed to be an entrepreneurial team
high-level tradeskillsandexperienceof runningasuccessful businessunit intherelevant sector
a'story' as to 'whythis, whynow'
excellent communication and marketingabilities
solid business planningand moneyraisingabilities
afinancial partner
This teamthen needs the capacitybehind it to deliver - this could be grant moneyto payfor second-
ments or career breaks, or indeed private investment.Wherever it comes from, significant resource in
both moneyand time is needed to get asocial franchise out of the startingblocks.
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Full support should be provided in puttingthe business plan together. It needs to be made clear fromthe
outset however, that the hub, through the business plan, is NOT responsible for the success of the unit
and no guarantees can be made.
There are no hard and fast rules on whether the franchisor or franchisee should take the lead in putting
the plan together. It is the franchisee that has to hit the sales targets however, so theymust feel comfort-
able with both the market research and the underlyingassumptions that generated the sales forecasts.
Step 7:Unit trading
The earlymonths of tradingcan be intense whilst systems and people 'bed down'. It is crucial that all the
correct systems are in place before the unit launches, and that the unit is managed on averyregular basis.
Financial, sales and other keyperformance indicators need to have been set, and theyneed to be moni-
tored on amonthly, if not aweekly, basis.
Close management support and supervision needs to be routinelycarried out, and that fact that 'things
are quiet' is certainlyno indication that 'all is well'!
In conclusion
We hope that this guide has provided you with the information you need to better understand social
franchisingand its possibilities for you and/or the social enterprises you support.
We believe that social franchisinghas the potential to offer social enterprise and societygenerallya
great deal.We need value-based enterprises to cope with the manydemands our societyis facing.We
need to learn fromnature the power of self-organisation as demonstrated bystarlings and so many
other livingthings.
Asmanycommentatorshavesaid,wearenow enteringtheThird Industrial Revolution which will becharac-
terised bydecentralised information,energyand production.Wealreadyhavethedecentralised information
systems,through theinternet,and thetechnologyto achievethis.All weneed now arethedecentralised and
self-organisingbusinessmodels,which social franchisingcan help provide,to makethisvital leap.
Developinganew business model is difficult, and unsurprisinglynot all social franchises have achieved
what was expected of them. But as we have seen, there is agrowingrange of successful examples.We
hope this guide has helped synthesise this learningand ensure we can build on these failures and success-
es for the benefit of all.
Steps 1 to 4 all need to have been put in place before the roll-out of replication can commence.There
needs to be clarityin what preciselyis beingoffered to particular host or support organisations.
Step 5:Identify the pilot units
Whether theyare called 'pilot units' or not, the first couple of replications are to all intents and purposes
pilots. If theyfail, so will the social franchise.Theywill also provide afabulous testingground for the
business manual.
There will be atension between wantingto get the first couple of units operational, and beingpressured
into choosingthe wrongorganisation or location. In terms of the unit location, those involved should
know better than anybodywhat works and why! Theywill need to trust their judgement and wait till the
right opportunitycomes along.
Choosingtheright host organisationismoredifficult,and thereisno easyformula.Pointsto look for include:
its own track record at deliveringprojects
its access to recourses
its commitment to the project - is there joint risk, for example?
does it like and trust the people involved?
does it fullyunderstand the relationship - for example, is the host organisation happyto bow
to experience in terms of the unit, hiringand firingof staff, etc.?
Step 6:Implementation - developing the unit
Obviously, qualitybusiness development support is crucial here. However keypointers are:
Recruitingthe right unit staff teamis one of the most important stages of the process.
Establishingthe right local development teamto chart the progress of the project is also vital.
Membership of such ateamwill varydependingupon the type of project/unit unit, but the
social franchisor should convene and manage it. It should also involve:
the host organisation
recentlyrecruited unit staff
local regeneration agencies/funders
The robustness of the business manual and implementation plan is also beingtrialled. Experience and
'action research' here will allow abetter 'product' to be developed.
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Appendix 1Care & Share Associates - Employee-owned socialcare
CASA's mission is to:
Democratisehome-careintheUK - togreatlyenhancethe'social enterprisetake' of theUK'sHealth
andSocial Caremarket throughrobust competitionwiththeprivatesector,andclosecollaborationwith
thepublicsector.Thiswill beachievedthroughthereplicationof successful social enterprisemodels
workingwithinthehealthandsocial caresector.
CASA is the UK's leadingemployee-owned home care social enterprise, and, with its founder organisation
Sunderland Home Care Associates (SHCA), was Social Enterprise of the Year 2006.With four CASA units
in operation, and providingover 7,000 hours of care per week, CASA is viewed bythe Department of
Health and others as atrail-blazer in health/home care social enterprise franchisingand replication.
Context
Themarket for qualityhomecareservicesisset to expand significantly,for both economic and demographic
reasons.Thevast majorityof commentatorsand forecastersagreethat,aspeoplearelivinglonger,while
informal support structureshavebecomelessprevalent (owingto awholerangeof social,economic and
cultural factors),thepressureon thecaresector isset to increase.In addition,an ageingpopulation not only
meansmoredemand for care,but also increased pension pressure.It hasalso been recognised byall main-
streampolitical parties,policyforums,and voluntarysector groupsthat thevast majorityof peoplewant to
stayin their own homesfor aslongasispracticable.Finally,spirallingcostsof both hospital and residential
care,and increased pressureon public sector health and social carebudgets,mean further demand for
increasinglycomplex homecareservices.
Care& ShareAssociates
Appendices
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Thediagrambelow setsout theorganisational relationshipbetweenCASA anditsassociatedreplicationunits:
Success factors
Strongand entrepreneurial management team
Proven business model and track record
Better business model. Incentivised stakeholder staff results in:
better pay
better terms and conditions
increased investment in training
lower staff turnover - anaverageof 3%to 5%acrossSHCA and theCASA replication
units,asopposed to 30%intheprivatesector.Suchalow staff turnover leadsto
improved continuityand qualityof care
A commitment to local recruitment and trainingadds to the stock of care-workers, and
therefore public sector 'buy-in'
Service re-design
Individual ownership of shares means 'owners' workingat the coal face
Wealth created is likelyto be spent in the community.This contributes to aholistic approach
to well being, in that it addresses the issue that povertyand health are intrinsicallylinked
Developed relationship with financiers
A 'no nonsense' prospectus, business manual and development methodology
Given this market context, players in the social enterprise home care sector, principallythe award-winning
employee-owned Sunderland Home Care Associates, established Care &Share Associates (CASA) in 2004
in order to democratise this growingmarket.
The service
CASA and its satellite units are based upon the Sunderland HCA model. SHCA was established in 1994
followingSunderland Council's call for expressions of interest in providingdomiciliarycare.A local resi-
dent and keen social entrepreneur, Margaret Elliot, successfullysubmitted abusiness plan. In 1994
Sunderland Home Care Associates was established and an initial contract fromthe council for 450 weekly
hours of care enabled the business to recruit its first 20 employees. It now provides up to 3,800 hours of
care per week and employs 180 staff
WhileSHCA increasedtherangeof servicesit provided,thecompanymadeaconsciousdecisionto remaina
locallyfocusedprovider rather thanlookingto expandgeographically.It thereforesupportedtheestablishment
of CASA to 'export' itssuccessful model to other partsof theUK,viasocial franchisingtechniques.
Legal and organisational structure
CASA is itself acompanylimited byguarantee.The precise detail of the legal structure for each CASA
unit depends in some part on the wishes of the prospective host organisation.A full set of memorandum
and articles of association are onlydrafted once detailed discussions have taken place.
However they feature:
Majority employee ownership, with the emphasis of the development phase being
focussed upon ensuringownership and control beingpassed to HCA employees;
A minority stakeholdingby the hub, under 10%, but significant enough to protect the
original values of SHCA and Care & Share Associates.
CASA has also established a'panel' whereby all units get the chance to share experiences, get
involved in trainingand professional development, and of course to have some fun! The panel also
has the function of electingtwo of its own members to represent the units on CASA's board of
directors.The panel is the way in which the CASA Group really articulates its voice to policy-mak-
ers and the outside world - to become the democratisingforce of the home-care sector.
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when theyuse the car. Cars are booked in advance bytelephone or over the internet and can be booked
24 hours aday.The cars are located at specific, clearlymarked points, usuallywithin 10 minutes' walking
distance of where people live or work.The pricingscheme for car clubs is specificallyaimed to make them
attractive for short local or regional journeys.
Option C Durham' successfully launched in DurhamCity in February 2006 and has already
achieved a significant amount of media exposure generatingrequests fromresidents and local
authorities across the region to establish car clubs in their areas.
Why expansion through franchisingthe car club model?
Option C is now in the process of franchisingout the successful business model across the
region. So what is the Option C unique franchise offer?
1. The car clubs retain local ownership, enablingmembers to have a role in making
decisions such as where to locate the cars and the type of cars to be used.This
empowers individuals in communities to tackle climate change and significantly
contribute to reducingcar use.
2. The approach reduces the shared costs of brandingand bookings administration, and increases
the abilityof each car club to meet demand byholdingafloatingstock of cars.
3. Option C ensures demand in rural areas is met. Despite the significant market need for
car clubs in rural areas, commercial operators will not touch themas there are not the
lucrative pickings that can be made in inner-city areas.The franchise model enables rural
local communities to establish their own Option C car club with relative ease (i.e.
relatively low start-up capital) to service their own local needs.
4. Option C offers aclear powerful brand which is aboost to marketing.
5. TheOption C businessmodel iseasyto specifyand istried and tested (demand isproven and it
worksfinancially).Similarlythecompanyinfrastructure(website,call centre,servicingand in-car
technology) areall well proven.
6. An integrated network of franchised Option C car clubs across the region will enable
members to access more cars in agreater number of locations. Members will be able to access
anyOption C car club franchisee fromacross the region, i.e. members fromNewcastle can
travel to Durham, or even London, bytrain and access acar when theyget there.
Each of the Option C car clubs will offer the opportunityto have an enormous societal impact on
rethinkingcar use and promote other sustainable transport options across the region.
Contact
Paul Balmont
www.optionc.co.uk
paul@optionc.co.uk
Finance
Core fundingfor CASA in its early stages has been provided by the European EQUAL-funded project
INSPIRE, while each new business requires an initial investment of around 90,000 fromlocal funders
and acommitment fromthe local authority to purchase aspecified number of hours once the company
is established. In addition CASA has an ongoingrelationship with Co-operative and Community Finance,
asocial finance provider, who have made loan agreements to each new unit to contribute towards
workingcapital.
Contacts
Dr GuyTurnbull
guy.turnbull@economicpartnerships.com
www.casaltd.com
Appendix 2 Option C Car Club - A car club network
Option C aims to reduce car usage byprovidingmembers with short-termcar hire through cars based in
their neighbourhoods.This allows themto get rid of their car and make rationale choices about the best
formof transport to use. Option C operates in two areas in the North East and is expandingrapidly.
Context
The waywe use cars needs to change.Theyare
one of the biggest contributors to global warm-
ingand our cities are becomingincreasingly
clogged up with cars, for which it is increasingly
difficult to find parkingspace.
Climate change is never out of the news, yet
even the most avid recyclers amongst us, more
often than not, own and drive acar.
The service
Option C is workingtowards the strategic
development of an innovative regional network of satellite car clubs, bound together in astructure which
ensures that the benefits of membership are spread still further.
Option C is the first car club operator in the North East of England and therefore offers aunique service.
It aims to promote sustainable transport through the deliveryof car clubs resultingin areduction in pri-
vate car ownership, miles driven bycar and increased use of transport alternatives amongst its members.
It offers locally-based, short-termcar hire to people who become 'members' of the club. Drivers payan
initial one off joiningfee and are then charged per hour and per mile (inclusive of fuel and all other costs)
AnOptionCcar fromtheDurhamCityCar Club
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Opposites Attract
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Success factors
A keyfactor in the chain's success is that it brings multiple benefits to multiple stakeholders.A CAP Markt
not onlyprovides satisfyingwork for disabled people, but also supplies staple foodstuffs within walkingdis-
tance of people's homes, reduces car use (which has health, energyand congestion benefits), and regener-
ates the local economybyrecirculatingmoneylocally.
-A generous financial framework
Germanyprovides relativelyhigh levels of support for the employment of disabled people.As well as wage
subsidies, between 10,000 and 15,000 per job is provided for each job created for adisabled person,
half of which is loan and half grant.
An important but often forgotten factor is that it was the relativelygenerous - in the European context -
subsidyregime that applies to sheltered workshops that allowed themto accumulate the workingcapital
needed to develop the business ideain the first place.
-A good market segment
The business concept also offers manyadvantages to shoppers:
aculture of friendlyand helpful service;
awide range of products - 7,000 lines - which makes it a'one stop' alternative to out-of-town
supermarkets.While four-fifths of sales must be fromthe CAP Market range, the remainingfifth
can be sourced elsewhere, to suit local and regional tastes;
it includes additional services that increase customer loyalty- for instance delivery;
it has ecological appeal, bygoingwith the trend to energy-savingand against out-of-town
shopping.
-The right resources
industryexperience:the managingdirector has alongworkinghistoryin retail
the connections and market intelligence that comes with that experience
fairness:abalanced licence agreement that combines local autonomywith central discipline
solidarityand mutual aid:astructured decisions and information systembased on regular
meetings
critical mass:the CAP group has built up sufficient size to have negotiatingpower with its
suppliers
Support
GDW Sd helps each new licensee to draw up abusiness plan.The longretail experience and con-
tacts that GDW Sd possesses mean that it can offer extremely accurate advice to intended
licensees. For instance when anew location is under consideration, it can often find out through
trade connections what the previous turnover was, thus reducingthe risk of openingup.
Once the shop is trading, it gives management support usingbenchmarkingtools it has developed
Appendix 3 CAP Mrkte - Shopping for social benefit
The chain of CAP Mrkte (CAP Markets) is growingsteadilyand has 55 shops.Theyare medium-sized
neighbourhood supermarkets employingdisabled people.The CAP Markets employsome 600 people and
probablyconstitute the biggest social franchise in the world.
Context
GDW Sd - Genossenschaft der Werkstatten fr behin-
derte Menschen Sd eG - is acharitable co-operative of
sheltered workshops for disabled people based in Baden-
Wrttembergand Bavaria.
Part of the role of GDW Sd is to develop employment
opportunities in social firms for disabled people. It identi-
fied an opportunityin groceryretailingwith commercial
supermarket chains abandoningsmall to mediumsized
supermarkets which GDW Sd felt could still be profitable.
The service
GDW Sd developed the CAP Markt ideato capitalise on
this opportunity.The business ideais to take over premises left emptybythe flight of the main supermar-
ket chains to out-of-town sites, and open neighbourhood groceryshops that are accessible on foot and
provide afriendlyservice.The shops have asales areaof 400-1,000 m, stock 7,000 lines, turn over
between 750,000 and 2mayear, and employbetween five and 20 people, two-thirds of whomare dis-
abled.
Theyprovide jobs for disabled people, aidingtheir integration through direct contact with customers;
bringabout local regeneration (byprovidingaccessible facilities for people without cars);and counter
exclusion byofferingservices such as home deliveryof meals or postal services.
Results
The first CAP Markt opened in Sindelfingen, near Stuttgart, in 1999.The chain has now grown to 55
shops, with manyin Baden-Wrttemberg, but an increasingnumber in other areas of Germanyas well.
Theyprovide some 600 jobs, predominantlyfor severelydisabled people.
Approximatelyone-third of the shops are run bysheltered workshops, and two-thirds are social firms
tradingon the market. Some associations run several shops.The attraction for disabled organisations run-
ningsheltered workshops is that openingaCAP Markt enables themto create jobs for their users in the
'real world'.These allow disabled people to have near-normal workinglife and to be afullyintegrated part
of the local community. Manyof the jobs that sheltered workshops undertake, such as assemblyor logis-
tics, are carried out awayfromthe public gaze. Retailing, on the other hand, brings users into direct con-
tact with the public, and so has apotentiallygreater therapeutic effect.
TheGermanCAPMrktesocial franchise
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Opposites Attract
56
Appendix 4 Le Mat - A social hotel chain
LeMat isachainandnetwork of hotelsandother accommodationfacilitiesthat arewelcomingandaccessibleto
everyone,andarerunbyco-operativesand/or social enterprisesemployingdisadvantagedworkers.It isasocial
enterprise,withinwhichpeoplewho arenormallydiscriminatedagainst andexcludedfromthelabour market
cancreatepossibilitiesfor meaningful work,futureprospectsandindependence.
LeMat hassuccessfullyusedsocial franchisingasameansof achievingbothfaster entrepreneurial growthand
social outcomes.
Context
Twentyyearsago,fiveyoungwomenstartedahotel inTrieste.Theyweremembersof Il PostoDelleFragole(atype
Bsocial co-operative),whichconsistedof youngpsychiatric patients,drugaddicts,doctors,andvolunteer mem-
bers.In2004around1EQUAL project testedthereliabilityof thisoperation.It lookedat whether franchising
couldbeusedasamechanismto helpsmall social enterprisesto operateinthehotel businessandto compete
moreeffectivelyonthemarket,without losingtheir essential qualities.
Thisproject helpedLeMat to investigateanumber of siteswherenew hotelscouldbeset up,andsupported
theproductionof 10businessplans.Trainingandpersonalisedsupport wasprovidedto potential social hoteliers
andlinksmadewithtourismandhotel experts.
LeMat Hotel Social Franchise
over the years.These enable licensees to compare their own performance with that of comparable
shops, discern their strongand weak points, set realistic targets and measure their future perform-
ance against them.
In groceryretailingit is widelyrecognised that the first two weeks' operation of anew supermarket is
crucial to its long-termsuccess. GDW Sd therefore gives each new shop particularlystrongsupport in
the openingperiod. It drafts in additional staff to make sure the atmosphere is good and the service is up
to scratch. It applies the many'tips of the trade' that it knows to aid each new franchise.
As regards organisational development, ameetingis held every year of all shops. Regional meetings
take place monthly. Less formally, telephone support is available fromshop to shop.
Quality assurance is an important aspect of the licence, and the central staff make regular visits.To
preserve the reputation of the group as awhole, they are authorised by the agreement to issue
instructions to shop managers should this be necessary.
The CAP Market brand is owned and run by GDW Sd.Whilst some of its members run local CAP
Markets, many of the franchises are run by local associations for disabled people that are not mem-
bers of GDW Sd and therefore do not have ashare in the ownership of the social franchise.
Finance
No specific financial package is available, however the fact that the brand and systemis by now
well-known and proven, alongwith the group's reputation for honesty and fair dealing, increases
investor confidence. Each shop licensee pays GDW-Sd a fee of around 10,000 for the franchise
in two instalments, and thereafter pays a levy of 1-2%on turnover.
Contact
Thomas Heckmann
thomas.heckmann@gdw.sued.de
www.cap-markt.de, www.gdw-sued.de
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Opposites Attract
58
What have the successfactorsbeen?
1. Thecommitment andenthusiasmof thesocial entrepreneursinvolvedhasbeenakeyfactor that has
allowedthenetwork to progress.
2. A strongbusinessmodel whichisgainingextensiverecognition.Thevaluespromotedbythetrade
mark - social inclusion,decent work,ethics,sustainabledevelopment - areincreasinglyappreciated
not onlybyethical tour operatorsbut also bythegeneral public.Thishasfacilitatedcollaboration
withother tourismnetworkssuchasAITR (ItalianAssociationof ResponsibleTourism).
3. Thesocial franchisenetwork hasgeneratedastrongsenseof mutualityandconsiderableadded
value.Social hoteliers,especiallythoseinrural areas,tendto beisolated.Theyarerarelyconnectedto
tour operatorsor tourismnetworks.Their businessisverymarket specific,so theystruggleto find
specialist adviceacrosstheexistingsocial enterprisesupport infrastructure.Thenetwork brings
together social andtourismskills.TheLeMat associationisalso anetwork of experts(architects,
tourismoperators,hotel managers,etc.) providingspecialist advicethat supportsthebusinessof
runningahotel whilst at thesametimeemployingjoblesspeople.Exchangesandthetransfer of
knowledgehavehelpedsocial hoteliersto runtheir businessbetter,to findnew ideas,to avoidmis
takesandto improveresults.
Contact
RenateGoergen
renate.goergen@gmail.com
www.lemat.coop
Appendix 5 - Community Renewable Energy
Developingrenewable energyand communityprofitsCommunity
Renewable Energy(CoRE) works with communities to develop renew-
able energysystems which will provide independent, sustainable energy
supplies, reduce reliance on fundingand generate an income. In return,
CoRE will retain astake in the projects that are set up, and use it to
fund the establishment of more communityowned renewable energy
systems.
CoRE will set up avarietyof types of renewable energysystems (e.g.
hydro, wind and biomass) and through avarietyof companytypes.
However, it is still considered to be asocial franchise even though
there is no replicable business model, as there is with CASA or CAP
Markets (though it is planned to establish model developments).All the
companies share the CoRE brand and all will call on common knowl-
edge and expertise fromCoRE.Theywill also own the brand and share
services.
Rt HonDavidMiliband,MP
speakingat CoRE Network meeting
The service
A franchisingnetwork of 10co-operatives(thenumber isgrowingrapidly) hasnow beencreated.Most of them
werealreadyactiveinthehotel or tourismsector but all benefitedfromLeMat know-how to improvetheir
businessandto ensurestableemployment to disadvantagedworkers.Thenetwork hasalso developedstrong
linkswithmajor tour operators,tourismassociationsandlocal authorities.
At present LeMat includeseight hotelsandhostelsall over ItalyandoneinSweden.Two morearebeingcreated
(oneinSicilyandoneinSweden).
LeMat hasproducedfour detailedbusinessmanualsoutliningitsmethodology.Insummarythemanualspreachthat
social hotelscantakeonanycompetition:thepreferredlocationsarehotelsof 3-star standardwith30-60rooms
near thecentreof major towns,inareaswherehotel occupancyratesarehigh.It also advisesusersto minimiserisk
bybalancingout customfromthreemarket segments:individuals,corporateclientsandtravel agencygroups.
A 'LeMat' trademark hasbeenregisteredat Europeanlevel andit belongsto theLeMat consortium.Thecon-
sortiumisasecondlevel co-operativeandactsasthefranchisor,adaptingcommercial franchisingmethodsto the
needsof social entrepreneurs.
Whereasincommercial franchisingtheownershipof thetrademark isexclusivelyinthefranchisor'shands,the
LeMat brandisownedbythefranchisees.Furthermore,themethodisbuilt fromthebottomupandwiththe
contributionof all themembers(franchisees) to therunningof theenterprise.
LeMat offersitsmembersthefollowingservices:
guidance,trainingandconsultancyinthecreationof co-operativesandsocial enterprises
support andtechnical assistanceinstartingupandbusinessplanning
training,consultancyandsupport infindingandsettinguphotels
vocational trainingfor disadvantagedpeopleandhotel workers
entrepreneurial trainingandconsultancy
support withpromotionandcommercial development
research,studies,designingof modelsandpathsaimedat theemployment andvocational growthof
peoplewho areexcludedfromthelabour market
support inraisingfundingandaccessingcredit
agreementsandcontractswithsuppliers
contactswithtourismassociations
joint participationintradefairs
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Opposites Attract
60
CoRE doesnot chargenew organisationsit workswith afeeof anykind.It looksfor thenecessarycommit-
ment fromprospectivefranchiseesand theopportunityto establish aprofitablerenewableenergysystem.
CoRE receivesitsfinancial return fromsharingtheprofitsfromtherenewableenergysystem.
It is expected that BioCoRE will be the first to establish a100 kWh diesel CHP systemrunningon used
vegetable oil which should be operational byFebruary2008.
Finance
CoRE anticipates that byyear three the first three of these companies will be generatingan income of
78,000 per annum.This income will be sufficient to maintain and grow CoRE.
CoREanditsmember companieswill haveasubstantial requirement for capital ofjust over 2million,whichwill beprovided
throughinterest-freeloans,interest bearingloans,grantsand,inthecaseoftheBerwickwindturbine,equitystakeholders.
Grantsof 385,000havebeensecured to revenuefund theestablishment of CoREand itsmember companies.
Organisation
CoRE has grown out of and is supported bythe INSPIRE Project. It has developed aproven social fran-
chisingmethodologyupon which CoRE's business model is based. It has amanager and administrator and
is acompanylimited byguarantee that will probablyseek charitable status. Its board is made up of repre-
sentatives of the companies it establishes, support agencies and the staff, alongwith co-optees.
Franchisees', those companies set up byCoRE, will mostlybe CommunityInterest Companies.Theywill
covenant aproportion of their profits, rangingfrom10-60%, to CoRE.This will normallybe for afixed
period and is designed to reflect CoRE's contribution to establishingthe new company.After this period,
some member companies will shift to payingmembership fees and fees for services provided byCoRE.
Marketing
CoRE will focus its marketingand engagement activities on communitygroups interested in renewables,
policy-makers and funders. It will use arange of strategies to reach these target groups.
A keyelement will be the CoRE Network.This has alreadybeen established and currentlyhas amember-
ship of around 60 communitygroups and support agencies. It will be further developed to meet on areg-
ular basis to enable the interchange of information between members, to identifypossible services and
companies CoRE could develop with communitygroups and to provide avoice for the sector.
Buildingcredibilityin amajor market such as energyis crucial particularlyfor what is effectivelyanew
start. It has been created by:
engagingcommunities in the work of CoRE as active participants and workingthrough their
support agencies such as the Development Trust Association
Context
Communityownedrenewableenergysystemsareneededfor four reasons:
1. Non-renewableenergysourcesarerunningout.Energypriceshaveriseninresponseto thisand
growingdemand.
2. Our current dependenceonfossil fuelsisresponsiblefor climatechange,which,uncontrolled,could
haveseriousimplicationsfor our long-termfuture.
3. Thedemandandneedfor renewableenergyishighandassuchpotentiallyhighlyprofitable.
Communitiesareinastrongpositionto capitaliseonthisopportunityastheyhaveinother
Europeancountries.
4. Despitecommunitygroupsshowinginterest inrenewableenergy,it hasbeentoo complicatedfor
most of themto turnthisinterest into reality.
The service
CoREproposesamarket-orientatedapproachthat will overcomethebarriersto entryandallow communities
to generateincomefor communityactivities.It will do thisbyestablishingtwo typesof social enterpriseswith
communitybasedorganisations:
1. Joint ventureswithCoREto establishlarger renewableenergysystemslikewindturbinesor hydro-
electric schemes;
2. Membershipco-operativesof CoRE,communitygroups,individualsandfuel suppliers,to set up
smaller renewableenergysystemswhichwill supplymembers.
CoREalso intendsto set upcompaniesthat will supplyservicesto thesecompanies,suchastheraisingof
financeor sellingof RenewableEnergyObligations(ROCs).It plansto establishthesecompaniesinthreephases:
1. Quick andcertainreturns- CombinedHeat andPower (CHP),frombiofuelsincludingwood
2. Higher risks,higher rewards- e.g.largewindturbineprojects
3. Vertical developments- e.g.energysupplycompany
Phase1will involvetheestablishment of four companies:
1. Bio CommunityRenewableEnergy- settingupbiomassCombinedHeat andPower (CHP) systems
generatingheat andelectricityfor members
2. WoodCommunityRenewableEnergy- supplying,installingandrunningwoodfiredheatingfor user
members(e.g.development trustsandschools)
3. Berwick CommunityRenewableEnergy- ajoint venturebetweenBerwick Development Trust and
CoREto set upan800kWhwindturbine
4. TeesdaleCommunityRenewableEnergy- ajoint venturewithTeesdaleVillageHall Consortium
to providerenewableenergysystemsfor the33membersof theconsortiumandtheir communities
Opposites Attract
62
workingwith agencies involved in renewables such as National EnergyAction (NEA)
involvingpoliticiansincludingDavidMiliband,theForeignSecretary,andStevenByersMP
gainingfundingfromtheNorthEast'sRegional Development Agency,OneNorthEast
Objectivesand impacts
A number of objectivesagainst whichCoRE'sperformancecanbemeasuredhavebeenset.Keyamongtheseis
theestablishment of fivecommunity-ownedrenewableenergycompanies.
Achievingthiswill requireamodest investment of around380,000ingrants.Thiswill enableCoREto become
self-sustainingandto helpcommunitiesgenerate80,000ayear inincome.It shouldbestressedthat thesefig-
urestakeno account of futureenergypriceincreases.It will also reducecarbondioxideemissionsbyover 2,200
tonnesanddirectlycreatesevennew jobs.
But thisisfar fromall.OnceCoREisestablishedit will havethepotential to grow exponentiallywithinthecom-
munityrenewablesector.Thiswill haveamajor impact intermsof theenvironmental andfinancial sustainability
of thesecommunities.
However,it maybethat CoRE'sbiggest contributionwill betheprovisionof dependable,stablypricedrelatively
low-cost energy.Communitiescontrollingsuchassetsarelikelyto havehugeeconomic andsocial advantages
comparedto thosedependent onadiminishinganderratic conventional energysupply.
Contact
RossWeddle
rossweddle@phonecoop.coop
www.core.coop
www.core.net
KeithRichardson
keith@biocore.coop
www.biocore.coop