Non-Profits Operate Franchises On The Side

Charities Begin Buying Franchises For Additional Revenue Streams

With competition heating up for philanthropic donations, grants and government funding, non-profit organizations are turning to franchises to provide additional revenue. It is a new sector in the industry called "social franchising".

Nonprofits, with limited business acumen, often flounder in operating their own bookstores, thrift shops and day-care facilities. A franchise provides a "cookie-cutter" model as a way to earn extra cash. "It [social franchising] has the attraction, from the nonprofits' standpoint, of providing infrastructure, product, administrative systems, and a proven marketplace," says Professor James Austin, emeritus professor of business administration at Harvard Business School. "It's a risk reducer."

The Successful: Washington Vocational Services, Lynn Van Vactor helps find jobs for people with disabilities. The organization bought an Auntie Anne's pretzel franchise in 2005 and raves about the results. Reports Colleen Debaise of the Wall Street Journal ($$) "sales at the for-profit pretzel shop are booming, providing an additional $25,000 in revenue last year to fund her agency's programs." And it provides work for disabled workers. (Writer's note: the WSJ article does not clarify how much in extra expenses it took to provide the additional $25,000 in revenue.)

Ben & Jerry's, social franchising since 1987, waives its $30,000 franchise fee and royalties for certain nonprofits. Jennifer Shewmake, program manager for the Ben & Jerry social ventures observes, "What we've found is that the model is complex, and meeting the demands of the double bottom line is a challenge." Although not every social franchise shop is profitable, each fits in Ben & Jerry's social mission, a key part of the company's marketing strategy, she says.

The Struggling: The YWCA opened a Ben & Jerry's shop in 2005. "The company lost $50,000 in its first nine months of operation, and then an additional $60,000 in the next 12 months."

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Read More at the WSJ.com ($$, Subscription required)