‘Social franchising’ is hot, but it’s easier said than done
February 14, 2013 Editor 0Silulo has educated over 10,000 students in computer and business skills. Photo: Silulo
Luvuyo Rani, a teacher-turned-entrepreneur, hopes to lead a computing revolution with his low-cost internet cafes.
Of course, Silulo is much more than just a place to check your email: it also offers a whole range of IT packages for South African entrepreneurs, from computer sales to computer training. Much of their growth has come from tailoring their services to local businesses’ needs through innovative solutions like teaming up with Vodacom to offer prepaid 3G dongles with each computer sold.
But Rani says the real key to Silulo’s success is the price, which is driven by his desire to benefit the community.
What is central to my business model is affordability… It is essential for entrepreneurs in these markets to be socially minded and not only profit-driven.
In seven years, the business has grown to cover the Western and Eastern Cape with 11 locations, educating over 10,000 students. With an eye on expanding his proven model to other states, Rani is considering franchising the operation.
The term “social franchise” has become a buzzword. Two recent articles in the Harvard Business Review toted franchising as the future of social enterprise, urging entrepreneurs to “let go of the artisanal nature of social enterprise” in the name of global impact. “Right now we’re missing a huge opportunity that’s right in front of our noses,” Seth Merrin and Brian Walsh wrote. Like the hybrid investment model, many analysts are preaching franchising as the solution to social enterprise’s financing woes.
It’s easy to see why. Any startup in a developing country is a high-risk affair, and a franchise allows aspiring entrepreneurs to lower their risk by copying a proven model and adapting it to their local environment. An businesswoman in rural South Africa could tap Silulo’s business model and experience to make her business an easier sell to investors. The business would have a higher return on investment, building investor confidence in the model. Eventually, successful models would scale globally, putting social enterprise on the map. Experience has already proven the model works, analysts declare, and the only thing stopping us is our own romanticized preconceptions of how ‘normal’ enterprises grow.
Unfortunately, experience shows the model doesn’t always work. UK-based Aspire revolutionized social enterprise in 2000 by forming Aspire Group, a franchise model that they hoped would expand their operations to 30 outlets by 2003. Tony Blair was seen carrying Aspire shopping bags at a booster event, and by 2001, the company was doing $1.6 million in business.
Perhaps the model was too good to be true. Aspire gave homeless workers full-time work selling fair-trade items door to door out of a catalogue. Employees received lessons in a variety of relevant business skills but were paid a flat rate rather than by commission. The company chose franchisees experienced in working with the homeless but who had little business training or familiarity with social enterprise. “Risk analysis didn’t feature very strongly in our discussions or planning,” one franchisee recalls. After all, the model had already been proven to work. Right?
The model didn’t work, and by late 2003, Aspire Group was effectively bankrupt.
Success stories like the UK Foodbank Network show that social franchises can work, but “turning the everyday workings of a social enterprise into a systematic operation that can easily be replicated elsewhere could be tricky,” acknowledges Dan Berelowitz, chief executive of the International Center for Social Franchising. The ICSF is building an online guide to help social entrepreneurs systematize their businesses plans.
Thirteen years after Aspire opened its first franchise, only about a hundred such organizations operate in the UK. No global estimate of the number of social franchises exists yet, and without more models and figures, it will be difficult to tell how reliable the model is. Far from safe, social franchising needs risk-takers like Rani to find out if the talk is all hype or reality.
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