A recent virtual seminar hosted by the Rosenberg International Franchise Centre at The University of New Hampshire (USA) showcased successful social franchises and how they achieve financial sustainability. The seminar featured speakers from social franchise brands, V’Ice, Jibu, Kidigo and South Africa’s own Unjani Clinics.
Social franchising offers a successful method to scale social impact organisations operating at the bottom of the pyramid (BoP). It involves the replication of a proven model that goes together with support mechanisms such as training and quality assurance. The growth of impact investing has been beneficial for social franchises, as impact investors are looking for successful investment vehicles.
Social franchises should consider the following factors when it comes to financial sustainability:
- Start-up capital remains a challenge
Whether seed capital for a new social impact organisation or start-up capital for franchisees or replication partners, securing start-up capital can be challenging. Jibu Water still finds that franchisees are most successful in securing funding from friends and family. The organisation now partners with Kiva, a crowdfunding platform. Kidigo funded an early childhood development centre from their own resources prior to franchising and Unjani Clinics still relies on CSI funding of its corporate donor to establish new clinics.
Despite these difficulties, once the proof of concept is successful and the organisation can show impact, obtaining grant funding and other forms of funding becomes more viable. Therefore, it is important to implement and test the concept rigorously prior to replication.
2. Aim to cover operational expenses from operational activities
Kidigo has reached a stage where operational expenses are covered by franchise fees (although the franchisees pay minimal fees), while research and other “above the line” expenses are covered by grants. Jibu Water created a successful model for the distribution of water in areas in Africa where there is a lack of access, and franchisees can run a profitable business once established.
3. Important stakeholders can unlock opportunities
Stakeholder engagement is critical in social franchises since most of these organisations have impact on the poor and disenfranchised citizens where they operate. Kidigo works with the government in Kenya and their online curriculum went onto television during this period of lockdowns in various countries. Unjani Clinics aligned their standards to South Africa’s health standards for primary care clinics, so that they are poised to become a delivery partner when a national health system is implemented.
4.There is a market in the middle
While many social impact organisations continue to service the poorest of the poor and are unable to charge for services, the social franchises participating in the conference have proven that there is a market in the middle, consisting of people who earn enough so that they are willing to pay for clean water, better education and health services that are readily available. An important aspect is to prove the quality of the service and to raise awareness of the impact of enhanced quality. Kidigo spent a lot of effort proving the impact that better childhood care has, to gain market acceptance. They now aim for at least 20% market share in all markets they enter.
5. Franchise associations can play a role
The only active franchise associations in Africa seem to be in South Africa and Egypt. The Jibu franchisee in Tanzania believes that a lack of understanding of franchising detracts from funding opportunities. Franchise associations can play a role by promoting franchising at both a commercial and social impact level.
6. Consultants add value to model design and long-term sustainability
Both Jibu Water and Kidigo paid tribute to the consultants who helped them to design their models for scale and advise other social impact organisations to get consultants involved in the design process. An experienced franchise development consultant can help social impact organisations to design their models for a higher propensity to succeed from the initial stages of development and can also provide advice on ongoing training and quality control to maintain the standards required to achieve impact.