Support and Replication of Social
Enterprises:
Franchise Suitability Matrix
Published by Social Enterprise UK
www.socialenterprise.org.uk
Developed by Prism Places Social Enterprise
November 2011
What is social franchising?
In its simplest definition, social franchising is simply the application of commercial franchising
methods and concepts to achieve socially beneficial ends. Or, to put it slightly differently:
Social franchising is the use of a commercial franchising approach
to replicate and share proven organisational models for greater social impact
A standard definition of social franchising has not been agreed to date, and the term has sometimes
been used interchangeably with 'replication' or 'scaling'. This causes unnecessary confusion, as there
are several different approaches to replication and scaling, of which social franchising is one.
Growth and replication strategies
DISSEMINATION
PARTNERSHIP
LICENSING
SOCIAL
FRANCHISING
JOINT
VENTURES
Flexibility
WHOLLY-OWNED
Control
Social franchising is part of a spectrum of replication strategies which range from the very flexible and
loosely controlled (dissemination, giving away for free, open source) to the more restrictive and tightly
controlled (wholly-owned by central organisation). Social franchising sits between these two
extremes, but does demand a larger degree of involvement and control from the parent organisation
than partnerships or licensing.
The initial definition above does require us to understand what we mean by commercial franchising.
The most usual form of commercial franchising is business format franchising.
Business format franchising is where the owner of a franchise system (the franchisor) enters into a
legal agreement with another person or organisation (the franchisee) which grants that franchisee a
licence to use its systems, brand and other intellectual property, and to use those to operate an
identical business in a particular area.
The franchisor teaches the franchisee the entire business format, and provides support via training
and communications to the franchisee for the duration of their business relationship. In return for
these systems and services, the franchisee pays an initial fee and ongoing fees to the franchisor.
The same applies to social franchising, which should also include the following:
- a legal agreement between franchisor and franchisee;
- ongoing obligations between franchisor and franchisee;
- the entire business format being duplicated, including the same brand;
- the franchisee being granted a particular territory to operate the business;
- fee payments from franchisee to franchisor.
This list also helps in distinguishing franchising from licensing, which is a related but distinct approach
Licensing usually involves being granted a license to provide a service or sell a product, rather than
an entire business format or system. The relationship between a licensing organisation and licensee
is also looser than its franchising equivalent. This usually means a much smaller package of training
and support (and not ongoing), and often no ongoing fees payable after the initial license purchase.
Moreover, licensees will usually not receive exclusive territorial rights, and the granted rights are
usually more limited.
This is not to say that franchising is preferable to licensing; it may be that the lower upfront
development costs and lower ongoing costs (of fees) are preferable to the licensee. Similarly, the
licensing company’s reduced level of involvement and support provision may be preferable for models
that require less control or for an organisation with less capacity.
Social Franchising Suitability Matrix - Social Enterprise UK, 2011
Franchising: success criteria
The success of a franchise opportunity is based upon it successfully meeting key criteria in five
different business areas:
1.
The business/social environment in which you operate – will your operating philosophy and
experience allow you to develop a successful franchise operation? Is there the capacity to
develop sustainable business growth with longevity of relationships?
2.
The products or services – is there a proven business model and are the products or services
suitable for franchising?
3.
Branding, Sales & Marketing – is the Brand sufficiently strong and is the approach sufficiently
well developed to provide a worthwhile advantage to a franchisee?
4.
Finance – is your financial position strong enough to support a franchise network and is there
enough profit (surplus) to satisfy both parties?
5.
Administration – is the business system proven, robust and able to be learned, replicated and
sustained by a franchisee?
Scoring
This matrix has been developed to help you assess if a business is suitable for franchising. Each of
the questions is aimed at stimulating thought within your management team. As with all tools it will not
give all the answers, however the scoring system has been designed to give a strong indication of
whether your social enterprise business is suitable for franchising.
Social Franchising Suitability Matrix - Social Enterprise UK, 2011
1. Business environment
Question
1.
2.
3.
4.
5.
6.
7.
8.
9.
10
Does your management team operate the business
using a hands on style relying on frequent “on-site”
visits and personal contact? (Micro management can
stop a business franchising where the owners can’t let
go of the day to day operation)
Business Culture: Your business will change to one of
starting and supporting new businesses rather than
what they do just now. Is the reaction positive?
Is there a positive response to probable changes from
being a small and perhaps informal organisation to
being a larger scale business operation with ‘business
partners’ (franchisees)
Is your business professional and well presented?
Consider premises, sales literature, reception area and
staff greeting/knowledge, cancelled/late meetings etc
Is the management of your business overly dependent
on a key individual(s) for winning contracts, customer
satisfaction, delivery, etc?
How long has the company been in business?
> 10 years = 10 points, 5 to 10 years = 8 points,
2 to 5 years = 5 points, < 2 years = 1 point
Do you have the management capacity to allow one
person to spend 50% of their time solely on developing
the business through franchising?
Evidence/Notes
Score
/10
/5
/5
/5
/5
/10
/5
What will stop the franchisee walking away from the
franchise at the end of the initial franchise term? Is
there a “hook” that will keep them dependent
on/connected to you? (e.g. product supply, research &
development, telesales service etc)
/10
Are there already similar franchises on the market and
can you compete? Is the proposed entry level cost
acceptable?
/10
Does franchising have the potential to increase the
amount of social and/or environmental benefits
generated?
/5
Score for Section
Social Franchising Suitability Matrix - Social Enterprise UK, 2011
/70
2. Products & Services
Question
1.
2.
3.
4.
5.
6.
7.
8.
9.
Evidence/Notes
Is the business operating in a highly volatile
market with constantly changing products, prices
or legislation? (If the market is transient this
makes franchising difficult – stable product and
market scores 10 points)
To what extent do you have standard, welldefined, clearly priced products or services (or is
each sale bespoke)?
Is there evidence of strong customer acceptance
of the products/services (at the full price)? Are
the products/services “must buy” products within
the business sector you work in?
Does your social enterprise have a specific
competitive advantage?
Will the business work across the whole country
or is it localised?
Are there genuine benefits of scale, e.g. does a
national network enable you to win national
customers or greatly reduce your unit costs?
Score
/10
/5
/10
/10
/5
/10
Is the product or service overly dependent on
key staff? If a key person who delivers the
product or service left and new people were
recruited, would the product or service be
seriously compromised? (low dependence on a
key person(s) = high scoring, high dependence =
low scoring)
/10
How much training will the average person need
to be able to sell the product or deliver the
service? The longer the training period, the
higher the return needs to be.
/5
Are any special qualifications needed to be able
to deliver the service or sell the product?
Consider legal issues. Are these easy to obtain?
/5
Score for Section
Social Franchising Suitability Matrix - Social Enterprise UK, 2011
/70
3. Branding, Sales & Marketing
Question
1.
2.
3.
4.
5.
6.
7.
8.
9.
10
11
Evidence/Notes
Score
Does the business have a unique marketing
approach that is distinguishable and recognisable?
/10
Are the marketing methods proven and successful?
Consider your marketing plan, market research and
other documentation?
/5
Does the business have a distinctive look, name and
logo? Are these registered and protected?
/5
Is your brand attractive to other social enterprises?
Could they feel shared ownership of it?
/10
How will other organisations in your business
environment and sector respond to a franchised
brand (e.g. other social enterprises, purchasers etc)?
/5
Do you monitor the sales process? Consider mail
shot success rates, conversion rates, average sale
value etc. This level of monitoring will be vital to the
success of the franchise network.
/10
What is the business’s reputation in its marketplace?
Consider trade press articles, opinion of advisors
colleagues and contacts.
/5
Is there any other intellectual property that forms part
of the business and is it protected?
/5
Is the Brand presented consistently across all
stationery, signs, vehicles, equipment. Franchising
requires attention to detail – It is important that the
Brand is delivered correctly.
/5
Are your prices competitive, particularly with major
competitors. If they are not then the franchisee will
not be able to compete successfully.
/10
Is there a standard, proven sales system that is seen
to be successful? Could it be easily learnt and
transferred to the franchisee?
/5
Score for Section
Social Franchising Suitability Matrix - Social Enterprise UK, 2011
/75
4. Finance
Question
1.
2.
3.
4.
5.
6.
7.
8.
9.
10
11
Evidence/Notes
Score
Do you understand the finances of your business?
(e.g. division by cost centre, profit margins, break
even points etc.)
/5
Does the business have good financial systems such
as up to date management accounts, i.e. do you
know what your profit was last quarter?
/5
How realistic is it to generate and/or raise the
necessary development capital? (Note that it can
cost between £50,000 and £100,000 to develop a
full national franchise network).
/5
Are the managers financially skilled? Do they
understand the financial information that they
receive?
/5
Do the management accounts and the previous
three years audited accounts show reasonable
profits?
/10
Are the profit margins great enough to share
between franchisee and the client company
(potentially including repayment of development
capital)?
/10
Are the branch operating costs controllable by the
franchisee? It is important that the franchisees can
control their own destiny.
/5
Has the client already run a pilot operation or do they
have a multi-site business? This will help to establish
the revenue and cost profiles
/10
Can a franchisee earn more from operating the
business than he/she would as an
employee/manager in the same industry?
Is the investment that a franchisee has to make
reasonable in the light of the potential returns they
will make? E.g.: rate of return > say 10%
Is your business model dependent upon certain
social motivation? (e.g. people working well below
their economic value)
Score for Section
Social Franchising Suitability Matrix - Social Enterprise UK, 2011
/5
/5
/5
/70
5. Administration & Systems
Question
1.
2.
3.
4.
5.
6.
7.
8.
Evidence/Notes
Score
Does your business operate simple, non-time
consuming administrative and organisational
systems? (e.g. HR, finance, marketing, knowledge
management)
/5
Do you have systems for organising the delivery of
your products/services? (e.g. sales, production
management, performance review, quality
assurance).
/5
Are the day-to-day processes documented in a
procedures manual or staff induction programme?
Has the business achieved Investors in People
status? Are they in process of achieving it?
/10
/5
Are the administrative procedures consistent and not
often changed?
/5
Is there a clear system for communicating decisions
and policies to operating staff?
/5
Is there a clear and communicated chain of
command within the business?
/5
To what extent is Information Technology used
within the business? (High degree of
computerisation should score high points.)
Score for Section
Social Franchising Suitability Matrix - Social Enterprise UK, 2011
/10
/50
Overall Franchising Suitability
From your scores, please indicate your own assessment on this continuum for each area of the matrix
(remember it’s not an exact science):
1. Business environment
0 points
35 points
70 points
35 points
70 points
35 points
70 points
35 points
70 points
35 points
70 points
2. Products & Services
0 points
3. Branding, Sales & Marketing
0 points
4. Finance
0 points
5. Administration & Systems
0 points
Social Franchising Suitability Matrix - Social Enterprise UK, 2011
Next Steps
From your scoring sheets, please consider next steps that you could take in each area to move
towards franchise readiness.
1. Business environment
2. Products & Services
3. Branding, Sales & Marketing
4. Finance
5. Administration & Systems
Social Franchising Suitability Matrix - Social Enterprise UK, 2011