The parallels between successful nonprofit and for-profit franchise businesses are similar – here’s how they can work together.
After 30 years of working with no more than two weeks off at one time, I spent six months unemployed. The sabbatical was filled with networking, reading, writing, praying, organizing, exercising, traveling, and spending time with my family. The time spent away from work helped me transform my life into this new season, which I call “fun-employment”. As I was not yet ready to retire and had the incredible opportunity to reset, I pondered how I could continue to contribute and take decades of leading, strategizing, executing and orchestrating franchise and corporate deals to help others.
With the help of an executive coach through The Halftime Institute and engagement with a cohort of 12 other leaders seeking significance versus simply success, I had the capacity and tools to develop an idea to help nonprofit organizations scale by using the franchise model.
The franchise model and nonprofits
Consider the inspiration of a nonprofit organization: a founder who is passionate about a cause identifies a need and commits to helping to raise awareness for an issue, raise funds to find a cure a disease, or help those less fortunate. Founders are passionate and they have developed a solid idea to help their organization solve real challenges and impact their mission. The reality is that many of the nation’s 1.2 million nonprofits struggle to expand and fail to reach their potential. Why?
• Founders start their nonprofit before funding is in place and without a fully developed business model
• The organization grows and the founder is making all the administrative and management decisions without a strong support team
• The organization can plateau as early donors reprioritize funding, leading many worthwhile nonprofit companies to struggle and close.
Doesn’t that story sound familiar?
The International Franchise Association reports that only 16 per cent of franchise brands will reach the 100-unit threshold within 10 years. That milestone represents a franchisor becoming royalty sufficient, which greatly increases the brand’s ability to succeed long term. Each year, approximately 300 new franchise concepts emerge and unfortunately, far too many brands with passionate founders and great concepts will ultimately close their doors for the same reasons cited above.
As I studied successful franchisors and nonprofits, I found several common elements:
• Established business processes and playbooks to address an issue
• Market need and value proposition clearly defined
• Business model clarity and proforma modeling in place
• Efficiency with talent and support
• Financing and return on investment
• Managed speed of growth.
The parallels between successful nonprofit and for-profit franchise businesses are similar. The franchise world has been leveraging a common set of tools, models, and best practices for decades, and I did not see evidence that anyone had applied them successfully in the nonprofit arena.
Franchising is very philanthropic – and hundreds of franchisors and thousands of franchisees give back locally and are significant benefactors in their communities. I have also seen companies like Ben & Jerry’s whose partner-shops made an impact. The International Franchise Association recognizes and supports these efforts and rallies others to do the same.
Common nonprofit growth obstacles
Nonprofits face many obstacles common to small business, like most franchises in the U.S.:
• Maintaining their existing model too long and failing to be nimble as the environment changes
• Clear value proposition or marketing communication messages • Playbooks and partnerships that leverage scale across like businesses
• Leadership development and progression within a slow-growth operation
• Mission diffusion as growth occurs
• Continuity of fundraising and new streams of revenue.
The systems that fuel franchising can be applied to accelerate nonprofit growth:
• Scale: franchise systems are built to scale and grow
• Consistency: franchisors have clear brand standards and compliance programs
• Risk: franchise business owners are eight per cent more likely to succeed than sole proprietors, which is important as 30 per cent of all new business fail
• Functional processes: franchisors know how to develop operations, marketing, finance, supply chain and legal systems across multiple units at low cost
• Financing: pro forma models and tools and clear ROI targets for investments in growth.
Why not apply these decades of learning and tools that hundreds of franchise systems have successfully employed to the nonprofit space? That is where the idea of Franchise For Good came to life. We want to scale nonprofits for social good, so we started a 501(c)(3) and set out on our mission.
How it works
There are three areas where franchising best practices can impact social good:
1. Assisting large franchisors to think differently and consider new models for social impact
2. Assisting large nonprofits as they scale
3. Helping small nonprofits with business basics as they start-up.
Tips for franchisors looking to add a nonprofit component to your system
In today’s social and economic climate, many companies pivot to ensure portions of their profits positively impact the environment and society at large. Additional motivation comes from retaining and attracting employees inspired by a company’s mission that aligns with their beliefs and values. Lastly, investors increasingly add ethical and purpose criteria to their decision-making process.
“The reality is that many of the nation’s 1.2 million nonprofits struggle to expand and fail to reach their potential”
Adding a nonprofit component to your company may help spread goodwill from the boardroom to the community. In fact, most franchisors already give back to their communities, even without a nonprofit division. Why not turn the support tools you provide to franchisees into a way to impact a nonprofit mission close to your brand’s core mission?
Tips for a large nonprofit
Consider this example: BuildStrong Academy is a new nonprofit company aspiring to train one million people in trade jobs. With more than 700,000 open trade jobs in the U.S. and >8 per cent unemployment, the market need is clear. I met the founder of a successful nonprofit business who needed to scale, and I was looking for a company to scale – so together we found leverage.
Franchise For Good and BuildStrong Academy engaged to leverage franchise best practices to replicate a successful prototype developed by Oakwood Homes via Colorado Homebuilding Academy. By building on the systems of one location, Franchise For Good will help BuildStrong Academy scale to 20 locations throughout the United States over the next 15 years.
When choosing a partner to help guide your growth using a franchising model, ask the following questions:
1. How much experience does your team have beyond consulting and in collaborating in a brand’s or nonprofit’s growth?
2. What assets will you gain? Ask for playbooks, best in class operating systems and scorecards to help your nonprofit achieve its full potential.
3. What functional areas will help bridge your resource gaps? Do you need help with site and candidate selection, construction, business planning, finance, administration, training and marketing?
4. What resources are available to manage on-going back-office services such as human resources, payroll, insurance, healthcare and legal?
5. Will you have access to purchasing power through economies of scale?
6. Would you have an opportunity to collaborate with other franchisors and nonprofit organizations?
7. Are executives available to advise on your strategy and execution?
If you are a small nonprofit, consider this impact
A Water Kiosk at School, which is a small start-up company founded by Venuste Kubwimana, helps rural community members in Africa efficiently obtain safe drinking water. It also provides valuable business knowledge to its youth by implementing a student-run kiosk, selling water from the school water source at an affordable price to local community members. The organization’s mission is to serve and empower the youth of Africa through business experience by providing rural communities with access to affordable, clean drinking water.
“Franchising is very philanthropic – and hundreds of franchisors and thousands of franchisees give back locally and are significant benefactors in their communities”
Kubwimana won the International Franchise Association’s NextGen Social Enterprise Franchise Award for his innovation. Following his recognition at the 2019 International Franchise Association Convention, he partnered with the Franworth team to take his charity to the next level. With inspiration from our company’s founder, John Rotche, our team is committed to helping others through mentorship. We developed A Water Kiosk at School’s business case, funding stream, business model and launched a new website. That project helped to inspire and shape the way Franchise For Good materialized. We knew we could apply our tools for social impact.
A call to action
Franchise For Good is a simple story of taking a set of proven tools, processes and best practices from the most tested and proven scaling idea on the planet – in franchising – and applying that learning for social good. Please join us and consider how you can impact lives for good via your own model and areas of influence and leverage.
DID YOU KNOW?
• Of 4,000 U.S. franchise systems, only a small percentage have a charitable component
• Franchisors add community value through sponsoring local events, assisting community fundraisers and sharing information through the media
• The desire for franchisors to add nonprofits exists, but no model has been successfully proven
The difference, however, is no one has yet applied franchise best practices, playbooks, tools and scaling models to the core operations of nonprofit companies in a systemic manner. It takes much more than passion and great ideas to stand the test of time – especially during periods of economic turmoil such as the attacks against the U.S. on September 11, 2001, followed by the housing market crash in 2008, and most recently, the global COVID-19 pandemic.
THE AUTHOR
Dave Keil has led four franchise companies as CEO and has been recognized for leading with purpose and guiding companies through significant change. Franchise For Good is a 501(c)(3) organization, founded to scale nonprofit organizations by leveraging proven franchise best practices. Franchise For Good is the official nonprofit division of Franworth.
