Europe’s social franchisers – doomed to succeed

Research recently carried out by the European Social Franchising Network (ESFN) shows that Europe’s social franchises probably employ around 13,000 people – two-thirds of whom are disadvantaged or disabled. And they are growing fast. The ESFN conference held on 18th October 2011 in Coin Street Neighbourhood Centre on London’s South Bank celebrated this fact.

Social franchising conference, Coin St, 18 Oct 11. L-R: Jürgen Blondeel, Emmanuel Vallens, Bosse Olsson, Toby Johnson, Elisabeth Mattsson, Ian Rothwell

Social franchising has slowly built up quite a head of steam among policy-makers, and ESFN itself, established as a European Economic Interest Group in 2008, now has 31 member businesses. The conference attracted people from 11 countries – including not only many young social franchisors of the future, but also UK’s Minister for Civil Society, Nick Hurd. He said that we need social franchises more than ever to resolve social problems in a vital way, by giving people a voice and keeping government of the way. He pointed to the need for better links between social enterprises and the financial establishment, and looked forward to the launch of Big Society Capital with £600 million to invest. There will also be a £10 million technical assistance fund to help social enterprises become ready for investment.

Introducing the event, ESFN’s chair, Keith Richardson, positioned social franchising as being the tool to create a step change in the size of the social economy, taking it from being 10% of the economy to being 25%. Firstly, he said, it is essentially about a structured exchange of information for mutual benefit. Secondly, it is market-oriented: unlike other business development techniques, it lives or dies with the success of the businesses it creates. Its strength is that when the franchises own the franchisor, all the parties share the same interest in growth, because costs fall dramatically with scale. Mr Richardson hoped that through such solidarity, social enterprises created to preserve public services could avoid the fate of the employee-owned bus companies of the 80s, which were picked off one by one by larger firms.

Inspiring examples

The scene was set by inspiring examples from several countries. Elisabet Mattsson and Renate Goergen of Le Mat described their transnational model, in which hotel chains in Italy and Sweden share an umbrella. Alistair Wilson told how the School for Social Entrepreneurs has spread round the globe. Ewa Sadowska described how, after the fall of communism in Poland, her parents set up the Barka Foundation which settled in a disused collective farm and turned it into a home for people suffering from mental illness. This has grown into a system of 60 therapeutic, education, employment and housing initiatives across Poland. She herself has come to London to work with Polish immigrants who have fallen on hard times. Sven Huysmans described how FIETSenWERK (Bike & Work) provides 600 full-time equivalent jobs servicing bicycles at railway stations across Flanders.

The conference also heard from what is believed to be the largest social franchise, Komosie, which operates 140 enterprises in Flanders. Komosie started out renovating and retailing second-hand goods, but has since branched out into energy saving.

A 21st century model

The event discussed the theoretical foundations of the social franchising idea as well as its practical implementation and benefits. Keith Richardson, Chair of the ESFN, talked about how starlings manage to co-operate without having a boss because their self-interest is in harmony with the collective interest. Robin Murray of the Young Foundation gave hope to our new wave social franchisors by drawing up a 2 x 2 matrix: he set out the two dimensions of subsidiarity – top-down versus bottom-up – and openness – standardisation versus the ‘generative’ method of social franchising. The way forward in his view is to be generative, and to open up possibilities for new enterprises, rather than forcing them into straightjacket. This seems to describe exactly the way franchisers like Le Mat describe and think of themselves.
He also reframed the process that social franchising enables, talking about it not as scaling up (a mass-production concept) but as diffusion. “In the social economy we sometimes haven’t recognised the benefits of structure,” he said. “Social franchising means moving from implicit to explicit systems. I think social franchising can become a real model for the expansion of the social economy.”

Echoing Nick Hurd, he felt that policy had laid too much stress on new starts and not enough on helping existing firms to expand. A 21st-century model of how to expand would include not only demand-side measures such as a kitemark, common sales and marketing, lobbying and policy campaigning, but also supply-side measures like training, technology, systems, methods and supply chains. The goal should be to find a way of reaping the benefits of scale without losing the benefits of smallness.

New EU fund for social enterprises

In the workshop on the European Social Fund, Lloyd Broad from Birmingham city Council, to whom the UK government has delegated the management of transnationality and innovation in the ESF ‘England and Gibraltar’ programme, familiarised us with the recently published Commission proposals for the 2014-2020 period. The ESF has been given four thematic objectives – employment, lifelong learning, inclusion and – in the poorest ‘cohesion’ areas – administrative reform. At least 20% of funds should be allocated to inclusion, and 80% of the money should be concentrated on just four out of 18 ‘investment priorities’. Six of these fall under the heading of social inclusion, and ‘social economy and social enterprise’ is one of these six. Even if governments do not select it – and on the face of it this is unlikely – social enterprise activity can just as well be carried out within other investment priorities such as ‘active inclusion’ or ‘community-led local development’. The overall message is that social enterprise is firmly embedded in the future of the ESF.

The ESF will be worth about €84 billion between 2014 and 2020. But in addition to this, the Commission also proposes to reserve nearly a billion euro for a new programme called the Programme for Social Change and Innovation (PSCI). This brings together the existing Progress programme with EURES and the European Progress Microfinance Facility. It will carry on the existing mutual learning activities such as the social inclusion peer reviews and beef up the international labour exchange role of EURES. Particularly interesting to social franchisors is the intention to practically double the current investment into the EPMF and to open it out to include investment in social enterprises. Approximately €95 million is set aside for social enterprise investment in the seven-year programming period.

At this stage the regulations are not finally agreed. The European Parliament and Council will now consider them, and they should be finalised by the middle of 2012.

What do social enterprises want?

The day closed with a the panel discussion, in which Elisabet Mattsson put forward the priorities for improving the environment for social franchising: a solid legal basis, more and smarter finance, a five-year competence development plan in each country, a mentoring programme and better organisation through long-term networking. For Jürgen Blondeel of Komosie Europe’s biggest social franchise with 4,000 employees, the priorities are development finance for the franchisor for the initial period of 3-5 years and a learning network for franchisors and franchisees on finance and methodology.

From the side of the public authorities, Emmanuel Vallens of the European Commission’s Internal Market DG outlined the content of the forthcoming communication on the Social Business Initiative (SBI). The motive behind the Commission’s rediscovered interest in the social economy is to relaunch the European single market and bring it closer to citizens. This means it should promote not only competitiveness but also social inclusion. The first step in that is to make clear that social enterprise is not just about labour market inclusion, but a much broader concept embracing businesses that make a profit in order to create social value. The SBI will act in three areas:
• access to finance – streamlining the Structural Funds, creating a framework for social investment funds and spreading microfinance;
• visibility – better information about social enterprises, as well as better information to them;
• the regulatory environment – in such areas as legal statutes, public procurement and state aid.

Further information:
European Social Franchising Network: http://www.socialfranchising.coop
Guardian’s Social Enterprise Network article: http://www.guardian.co.uk/social-enterprise-network/2011/oct/10/social-franchising-effective-european-network
Online Q&A session: http://www.guardian.co.uk/social-enterprise-network/2011/oct/19/best-bits-social-franchising-social-enterprise