According to a new research published today by the Social Enterprise Coalition, a number of obstacles are stopping some social enterprises from branching out into different sectors and geographical areas through franchising and partnership working.

Growing social enterprise: research into social replication reveals a number of external factors that are preventing organisations wanting to expand from being able to do so, including that funding for franchises and licence agreements is difficult to secure.

Social enterprises that have sought to replicate their businesses have found that grant funders and mainstream investors often view community-based social enterprises as unsuited to dynamic business growth.

The research, which drew on in-depth interviews with more than 20 organisations that have sought to replicate, found that social franchises fall into a ‘funding black hole’ because funders are perceived as reluctant to allocate grants on the basis that ‘franchising’ has commercial connotations.

And investors are perceived as suspicious of the notion of ‘social’ franchising and the possible implications of this for returns on investment and degrees of risk.

Barriers within the social enterprise community

The research shows that issues exist within the social enterprise community too. Some professionals aren’t aware of the replication options available to them, and lack understanding around the legal and financial practicalities of setting up a franchise or of working in collaboration with another organisation.

Such knowledge gaps are said to be hindering replication, as well as the view by some professionals in the sector that franchising is a ‘commercial’ form of replication, and could therefore compromise their organisation’s fundamental social or environmental objectives.

Successful Replication in Social Enterprise

The report says that franchising and licensing can and does occur in social enterprise.

Successful replication, according to the Social Enterprise Coalition, has worked for organisations that have:

A business model that can be standardised

An enabling commissioning environment

An appropriate legal form conducive to investment and recognised by funders

A financial model based more on income generation than grant funding

Intensive support at the start-up stage

Strong relationships with replicating partners


Report Recommendations

Growing social enterprise: research into social replication makes a number of practical and policy recommendations, including that:

Social enterprises and entrepreneurs need to be clear on why they want to replicate both for internal capacity and vision purposes, and to enable funders and investors to understand their proposed plan of action.

Funders (grant providers and mainstream investors) need to be educated about the benefits of social replication.

Local commissioning practices need to be more inclusive of replicated social enterprises.

Social enterprise professionals need to recognise and understand the variations on the spectrum of social replication, including social franchising, social licensing and collaboration (as well as their financial and legal intricacies).

Peter Holbrook, chief executive of the Social Enterprise Coalition, commented: “Franchising, licensing and partnership working can provide the social enterprise community with opportunity for growth and impact.

"Whilst replication might not be a road that every social enterprise wants to go down, or should go down, this research tells us that it needs to be better understood across the movement.

“Individually and as a collective, we need to work hard to change the mindset of funders and financial institutions, many of whom do not see replication as an option for social enterprises.

"Organisations should not be operating in fear that choosing to franchise would lead to a reduction in grant money, and funders need to know that behaving like a business is not a negative.”

Growing social enterprise: research into social replication has been funded by the Big Lottery and is available to download free from here

Share Story: