Social Franchising & Replication Robert Looker - Createx ©Exemplas Ltd May 2010
An Introduction to Franchising How Social Franchising & other forms of Replication can offer alternative ways to grow and develop for Social Entrepreneurs & Enterprises
Mainstream Growth OptionsThird Sector Growth Options? • Organic Growth • Joint Venture • Franchising • Licensing • Agency • Distribution • Other Examples
Why Franchise? Why Socially Franchise? • Expansion requires investment into property, equipment and staff • Franchise fees will generate a stream of capital income and ongoing revenue • A loss of profit margin will be offset by much larger overall revenues • Motivated franchisees ‘running their own businesses’ will generate higher per unit income than employees • Brand value can be generated and accelerated
Key success criteria • Proven and successful business model • Piloted and replicable business • Defined image and clear market position • Developed and easily duplicated systems of operation, management and staffing • Profitability for both parties • Sustainable market and source of ongoing clients • Defined recruitment profile and processes • Mutual respect and support - partnership
Some examples • Hidden Art • Sunderland Home Cara (CASA) • The Big Issue • Core • Relate • Unlimited Ventures (SF Initiative)
About Hidden Art • Mazorca Products trading as Hidden Art • Company limited by guarantee, not-for-profit. Set up in 1989 by Dieneke Ferguson as sole trader. 8.5 staff plus consultants, assistants, tutors • Mission • To promote and support designer-makers enabling them to establish and develop their businesses and create direct access to new markets • Vision • To be recognised as a valuable, international platform and meeting place for all designer-makers • Income through • Grants • Income generated • Sponsorship
About Hidden Art Innovative membership and networking organisation that supports and promotes designer-makers based in London and beyond, while offering members of the public access to original design. They: • Improve access to information • Enable exchange of ideas and expertise • Offer a platform for designer-makers to exhibit and sell works, products and designs to key markets and the public • Act as a broker and work in partnership with other organisations London based and did operate with a pilot social franchise in Cornwall, Hidden Art Cornwall
Hidden Art Open Studioswww.hiddenartlondon.com/openstudios First Open Studios took place in 1994 Two weekends before Christmas 2007 In 2006: • 13,500 visitors, sales worth £110,000 excluding commissions • 25 press articles • 60,000 maps produced • 66 participants in 47 venues Karen Bunting in her studio
www.hiddenartshop.com Launched 13 October 2005, now 1.5 million hits monthly on average 800+ products, over 100 designer-makers Average sales price £70 Buyers: UK, Europe, USA Professionals with high disposable incomes • 15% press coverage results in sales • Ranked 5th in Independent’s 10 best Interior websites (10/10/07) • Loop, Black & Blum
How a Hidden Art Social Franchise worked and now Hidden Art Collaborate • A Hidden Art Social Franchise was a satellite of the Hidden Art head office, providing tailored support to designer-makers in a specific geographic location (e.g. Cornwall) • As a result of supporting designer-makers locally, it contributed to promoting the locality as a whole as well as facilitating cross regional collaborations • Two types of social franchises: entry level (hub) and full regional Hidden Art Fair. This enabled the hub to pilot the basic aspects of the Hidden Art model in their regions, organically and cost effectively without reinventing the wheel • For cross regional collaborations Head Office secures match funding through the National Accounts scheme • Initially only in England, eventually also in other countries • Now developed Collaborative Model(s) of working
Support considerations • Key areas where support is needed: • Creating space for planning • Developing a core infrastructure • Working with and managing the network
Hidden Art: Lessons Learnt • Does the model work? • Does the model work financially? Is it Sustainable • Profile of Social Franchisee • Focuses you on Process and Systems & Quality Management – improves your performance • Develops your skills and culture for ‘Partnership’ and ‘Collaboration’
Tasks • Homecare • Assist Getting Up • Assist Wash and Dress • Assist Breakfast • Assist Bathing/Toileting • Domestic • Housework • Shopping • Laundry • Community Internet Café in tower blocks • Student Support • Academic support for disabled students in Sunderland University & Colleges • Residential Homes • Provide carer cover for Residential Homes and Eagle Cottages (learning disabilities • Children with disabilities • Help and support families with disabled children
From 1994 to 2006 • Employees: 20 > 210 (includes South Tyneside) • Weekly workload: 450 > 4600 hours • Turnover: 0 > £2m+ • Pre tax profit: 0 > £180,000 • 14.8% of shares passed to employees • 3 replication companies set up: • North Tyneside (2004) Staff 35 & 950 hours • Newcastle (2005) Staff 39 & 850 hours • Manchester (2006) Staff 48 & 1200 hours
Benefits • Better business model: Incentivised stakeholder staff results in: • Better pay • Better terms and conditions • Increased investment in training • = lower staff turnover – 3% as opposed to 30% = improved continuity and quality of care
Key challenges they have seen • Replication involves a different set of skills • Refining the ‘unit’ organisational model • Understanding the context and limitations • Financial and staff resources
Conclusions • Understand the business models and what makes them work • Understand what is required and do not compromise on the cost of implementation • Good professional advice is important • Social Franchising is a young business sector in the UK and is only appropriate for a few SEs currently but it will grow
The Fundamentals of Franchising • A business ‘partnership’ in which one party permits other ‘partners’ to replicate a proven business system over an agreed period, operating under a common brand, in return for initial and ongoing fees • Ideal for: • High margin businesses • Existing business networks or ‘pilots’ • Easily transferable knowledge • Identifiable brand or trade mark
What can be franchised? • Proven business systems capable of replication • Profitable businesses financially viable for both parties and financially secure • Steady or growing demand for products or services • Simple business formats that are easy to learn • Identifiable brands and trademarks with distinctive image or concept
SWOT Analysis Trading History How long have you been in business? What is proven? Profit Margins Are these above average industry benchmark? Is there enough margin for two? Market How big is your market? How volatile is your market? Does it have mass appeal?
SWOT Analysis Products Is there consumer acceptance of your product? Is your product or service easy to sell and deliver? Quality record? Brand Is your Intellectual Property protected? Is there a unique and distinguishable marketing approach? Reputation in the market place?
SWOT Analysis Business Management Do you have the management skills and capacity to create a new culture? Is your business professional and well presented? Is your management financially skilled? Do you have well documented processes and systems in use? How is Information Technology used in your business? What is your attitude to risk? Is there a commitment to research & development?
SWOT Analysis Franchise Opportunity Do you have sufficient access to development capital to fund growth? Are there similar franchises already on the market? Will the franchisee be able to control their costs? Term?
SWOT – Reasons for failure • Growing too fast too soon • Franchising for the wrong reasons • Lack of planning • Selecting the wrong franchisees • Lack of infrastructure and support • Failure to take proper advice
SWOT – Key criteria • Developed systems of operation and staffing • Defined image and clear market position • Proven and successful business model • Sustainable market and source of ongoing clients • Easily duplicated management systems • Profitability for both parties • Mutual respect and support - partnership
SWOT – Key criteria • Will your operating experience and culture allow you to develop a franchise operation? • Are your products or services suitable for franchising? • Is your Brand sufficiently well developed and strong enough to deliver a worthwhile advantage to the franchisee? • Is your financial position strong enough to support a franchise network? • Is your business system proven, robust and capable of being learned by a franchisee?
Franchisee model • Creating a framework manageable by others • Business model assumptions: • Will your business model provide a good income for the franchisee? • Will your business model give a franchisee a good return on investment?
Franchisee profile • Salary/earnings expectation • Liquid assets available to invest • Time commitment • Core skill
The Franchise relationship • Franchisor Rights and Obligations • To protect and grow the brand • Franchisee Rights and Obligations • To follow the system
Contacts details Robert Looker Exemplas Limited e-mail: firstname.lastname@example.org phone: 01707 398292 Mobile: 07734 562763
End of workshop Any questions? Thank you!