Social enterprise is a marvellous thing. I hope that you think that already (you're reading an article on the Guardian's Social Enterprise Network, after all). It contributes to the economy, employs people, creates jobs, and also "gives something back". So far, so good.
Awareness of social enterprise is certainly growing but I imagine if you stopped people in the street and asked them to tell you some well-known social enterprises, the vast majority wouldn't be able to name many at all Even as a solicitor who spends much of his day working with social enterprises, I'm not sure I'd be able to name many either. I could name plenty of smaller local social enterprises doing great things in their community and supporting the wider economy in that way, but big well-known ones?
If you were to do the same survey for private sector organisations, people would be much quicker off the mark. I recently played a board game based on adverts and logos, and it is quite scary how many products and companies I could name without having to break a sweat.
So how do social enterprises break into the big time? How do we get social enterprises to grow and, bit by bit, convince the wider world of their worth in economic times where the country would surely benefit from an even bigger social economy – one that's not primarily there to distribute profits to shareholders or pay them out in bonuses?
This is where social franchising comes in and, in a short series of articles on the subject, I will be looking at social franchising in more detail. What is it? How does it work? Is it a good thing? I'll be doing this primarily from my perspective as a lawyer.
Firstly, it's important to look at social franchising in its broad context – the desire to grow the social enterprise sector. There are a number of different ways to do it, being principally organic growth, takeovers, and social franchising.
Let's start with the first option – organic growth. This is, I suspect, the growth strategy for most social enterprises, beyond the understandable desire for survival. It is the simplest option for growth – gradually seeking to build a reputation for delivering good quality services and goods. As the reputation grows, so should the number of contracts to do more of the same. In time, the social enterprise may be able to take on more staff or even expand into complementary areas. Drip by drip, brick by brick, the social enterprise should survive and (hopefully) grow.
With organic growth, the approach is "slow but steady wins the race" (to borrow from Aesop's Fables favourite The Hare and The Tortoise). I'm reasonably risk averse so I can definitely see the appeal of this kind of strategy. The problem with organic growth is that it is, well, slow. It's understandable from the point of view of an individual social enterprise but in the overall context of sector growth it doesn't get us very far very fast.
How about option two – takeovers? If the social enterprise sector is to flourish it has to learn what it can from the private sector and apply the principles in the context of the social enterprise framework. If takeovers seems too strong a word, how about "acquisitions"? In the context of the social enterprise world, this is taking an existing business – preferably a successful one – and socialising it.
Don't get me wrong, this is certainly not an easy option and not a cheap one either.
The due diligence process is vital to make sure, as best you can, that the enterprise you are acquiring does not have any skeletons in its cupboard. Then there are negotiations with the current owner about sale price, whether it is a purchase of shares or assets only, and about transition. Afterwards there are likely to be cultural issues to overcome as the business is gradually changed to a social enterprise.
Some work by Social Firms Scotland led to the establishment of Acquiring Business 4 Good and their website is well worth a look if you are interested in this particular area. Of course, from a business culture perspective as well as from that of affordability, smaller family-run businesses are likely to make easier targets than going for a multinational FTSE-listed behemoth, but in principle anything is up for grabs this way.
If the aim is bigger-scale growth of the social economy, then acquisitions certainly have their appeal. Not an easy option, as I said, and certainly more risk than organic growth, but likely to achieve bigger social returns if it comes off.
The last option, and the main focus of this mini-series, is social franchising. We'll look next time at what people mean by this phrase (as with the term social enterprise not everyone agrees). However, at its core it borrows another principle from the corporate world and socialises it.
For corporates, in one sense, franchising is easy: work out what is unique about your business and why it works, package and market it, and squeeze as much money out of your franchisees as they can bear while still leaving them with a sustainable business at the end of the day.
In the social enterprise world, it isn't quite so straightforward but the key features remain the same – a franchiser, a franchisee, a common brand, and a sharing of knowledge in some way between the franchiser and the franchisee. Finding the balance between commerciality and community is tricky for social enterprises, with the heart and the head not necessarily in agreement, and we'll be looking at this in the next article.
Simon Lee is a solicitor at Anthony Collins Solicitors LLP
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