Category: Professional Development

We occasionally come across organizations considering franchising as a strategy for developing a social enterprise.

A franchisor is a company that has a successful product or service, business model and recognizable trade name (think chain stores), which it offers on a continuing contractual basis to other businesses (its franchisees), for a fee.

The advantage of participating in a franchise is that it allows an entrepreneur (social or otherwise) to focus their efforts on operating a business that already has a successful business model and track record.

In rough terms, franchising in the US accounts for more 750,000 establishments, ~10 million jobs, and more than $1 trillion in sales. And, for the nonprofit sector, Social Franchise Partners, an offshoot of Community Wealth Ventures, was created by Billy Shore to help more nonprofits become franchisors as a strategy for generating resources as well as social impact. A couple of years ago they published Streams of Hope, which provides extensive information and case studies on how franchising works and how to determine if it’s the right thing for your organization.

For a very small number of social enterprises, franchising might be the way to go. But for most others, the cultural gap is so great between the franchise model to pursue personal wealth at almost any social cost, and the social enterprise model to pursue both social and organizational financial stability, that we have seen more failures than successes on this path. Presently there are about 100 nonprofit franchisees in the US.

The Streams of Hope publication can be downloaded for free. So if you’re at all interested in franchising (or just curious), take a look and decide where to go from there. Franchising is not for everybody, but perhaps it’s just right for you….

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Copyright © 2010 Rolfe Larson Associates – Fifteenth Anniversary, 1995 – 2010
Author of Venture Forth! Endorsed by the late Paul Newman of Newman’s Own
Read my weekly blogs on Social Enterprise and Business Planning

I’ve had a fun day! Over at my Bernstein Crisis Management Blog, I posted an open letter to Connecticut Attorney General Richard Blumenthal, the increasingly infamous teller of tall tales about his alleged Vietnam service. The shy title of my blog post?

Dear Richard Blumenthal: You’re a Liar

Practicing what I preach, I then Tweeted about it and also let some media who have interviewed me in the past know about it. In the context of “common causes make for strange companions,” one of those media outlets was the Laura Ingraham show, and they re-ran my blog post on their blog and are mentioning it in their ezine.

So far Mr. Blumenthal hasn’t called to indicate he accepted the challenge with which I closed the blog piece. What a surprise.

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For more resources, see the Free Management Library topic: Crisis Management
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[Jonathan Bernstein is president of Bernstein Crisis Management, Inc. and author of Keeping the Wolves at Bay – Media Training. He’s also a Vietnam-Era vet who chooses not to lie about his service experience.]

It used to be that there were essentially three choices: private, public, or nonprofit. Privately-held companies offer the most flexibility, without outside investors or the IRS constantly looking over your shoulders. A privately-held social enterprise can choose to invest some of its profits into achieving social impact without anyone second guessing those decisions. But if you’re ready to raise large amounts of capital, going “public” through an initial public offering is the usual way to go.

There’s a price for that, though. Publicly-held companies need to justify their actions to investors, who, as the legal owners, have the legal right to force management to do everything it can to increase profits, even at the expense of social impact. Public boards are obligated to sell the company if doing so would enhance “stockholder equity.” For that reason, Ben & Jerry’s went from being an independent company with a social purpose, to being part of an international conglomerate. Ben and Jerry didn’t have a choice in the matter, nor did their board.

That’s why many for-profit social enterprises tend to be privately held.

But the times they are a changing. A number of states have approved the Low-Profit Limited Liability (L3C) corporate structure, which attempts to bridge the gap between for-profit and nonprofit models. L3C’s must “significantly further the accomplishment of one or more charitable or educational purposes,” but can still have private investors and make a profit. See http://en.wikipedia.org/wiki/L3C

Another “hybrid” is a For-Benefit Corporation, or B-Corp. Based on an independent assessment, B-Corps receive a certification as socially responsible, and in so doing make it clear to investors that the company will consider other stakeholders, such as the community and the environment. See http://en.wikipedia.org/wiki/B_corporation,

So as you consider how to get “organized” with your social enterprise, be sure to consider these other structures as well as the usual suspects including LLC, partnership, S and C corporations, and nonprofit.

Get some expert advice, and then pick the structure that best fits your purpose. There’s no one correct answer, just the structure that’s best for your purpose and your market. Form Follows Function.

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Copyright © 2010 Rolfe Larson Associates – Fifteenth Anniversary, 1995 – 2010
Author of Venture Forth! Endorsed by the late Paul Newman of Newman’s Own
Read my weekly blogs on Social Enterprise and Business Planning

On which side of philanthropy’s great divide do you stand? More importantly, where do your donors and potential donors stand?

The divide used to be less noticeable, but with the explosion of social media over the past five years, tweeting, blogging, and linking has brought the great divide to the forefront.

On the one side are those who assume that “social capital” belongs in the public domain and should be applied to the public good. The “public good” is defined by broad terms such as social justice and environmental ethics.

On the other side are those who are productively and satisfyingly engaged in personal philanthropy … where one’s giving is a personal expression of one’s own values, concerns, interests, (hopefully) vision, and, yes, even whim.

Do donors have a social obligation to subordinate their personal philanthropic passions to a group-think standard for how and why they should give? Isn’t that part of what we pay taxes for – how successfully have THOSE dollars been used to create social equity? Will a philanthropic “free social capital market” be any more successful – or socially just – than, say, a Goldman Sachs-school market?

The divide is more than polemics. If you think this debate has no bearing on your own nonprofit, think again. Where you stand on this issue will affect everything from how you frame your case, to how you package your appeal, to how you interact one-on-one with your supporters and those you serve.

Private philanthropic money … public good or private vision?

And what, in essence IS philanthropy … “love of mankind” or “obligation to mankind”?

Food for thought.

Farewell and fare well until next week …

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For more resources, see our Library topic Nonprofit Capacity Building.

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