Financing social entrepreneurship: A franchising approach

Abstract

Social organizations mainly cope with social problems that the markets and the states have trouble or even fail to solve and, therefore, social entrepreneurs have been emerging in different locations throughout the world (OECD, 2010). Instead of being driven by financial returns, social organizations are focused on creating social and/or cultural values and they are not moved by its appropriation (European Commission, 2013). Regardless of its non-profitable nature, a social enterprise needs to be financially sustainable, if it is to reach its social goals. However, it is well acknowledged that social organizations struggle to be financially independent through income generation (Zafareiropoulou & Koufopoulos, 2012). As an example, in a recent survey performed to NGO’s operating in Portugal (Project Entrance, 2018), social entrepreneurs have identified financing, as among the most critical problems they have to face. Therefore, social entrepreneurs must look for ingenious ways to solve their financial constraints. In this framework, social franchising has emerged as a strategy to overcome this problem. Moreover, franchising has also been adopted by non-profit organizations as a strategy for growth (Meuter, 2008). The alliance in a network of small social organizations allows them to gather the advantages of big organizations namely in terms of access to capital sources and rapid growth (Zafareiropoulou and Koufopoulos, 2012). However, in spite of the apparent auspicious solution it presents to social entrepreneurship, the franchising arrangements have been showing high failure rates in the social sector (Meuter, 2008). (...)