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The next part of the process is likely to be a meeting, and this is a critical chance for you to assess thefranchisor and ask key questions. Remember this is a two-way relationship that is seeking to beestablished, and you have as much right to conduct due diligence on them as the other way round.Your questions to the franchisor should include:-What is your organisational history?What is your organisational structure and governance?How many units do you have and what is their track record?What has been the collective social impact to date?What are your future (expansion) plans in the market?MODEL:-Do you have intellectual property protection in place (of the brand and/or product)?What training, induction and support do you provide during the start-up phase and on an ongoingbasis?What is your quality assurance process and how is this carried out?How is the communications and marketing done? Is there a pooled budget / package?What are the initial and ongoing franchisee fees?What is the typical annual turnover / financial projection?Do you provide assistance with staff recruitment if that‟s necessary?Do franchisees meet? How often does this happen?Where franchise relationships have gone wrong before, why has that happened?There are two further important questions that should be asked:1) What documentation can you share with me now?1- Ideally, this would include the operations manual , a template franchise agreement and so forth, but thismay not be possible. Or it may only be possible on signing a non-disclosure agreement with the franchisor.The closer the franchisor perceives that you are to signing, the more information you are likely to receiveand get access to.2) Can I meet / speak to existing franchisees?- Ideally, the franchisor will allow you to speak to any franchisee, rather than selected ones. You shouldask franchisees similar questions to those above, but particularly focus on the financial realities, thestrength of the support, and the quality of the marketing. A good opening question is “How well preparedwere you when you started?” Ideally, you would spend an entire working day with a franchisee to gain realinsight.At all times during these meetings and conversations, you should be assessing the cultural andrelationship fit with the franchisor. Strong social franchises are not only based on aligned missions and aproven model, but also on personal relationships. Be on the lookout for openness, transparency, clarityand candour from the franchisor, and be the same yourself. A relationship founded on trust will be criticalto success in the future, and for a genuine win-win partnership to be forged.1For an in-depth look at what goes in an operations manual, see the Social Franchising Manual (forfranchisors).8

5) Franchise agreements and documentationAs mentioned above, some franchisors will ask prospective franchisees to sign a non-disclosureagreement in exchange for viewing some of the core materials and documents of the franchise. There mayalso be a pre-agreement (like a memorandum of understanding) for the development stage, before theformal franchise agreement is signed.The franchise agreement itself is, as one franchising guide describes it, “potentially the most importantagreement you will ever sign”. While this may be stretching the point a little, it is important to take time over2the agreement and it is strongly recommended to get appropriate legal advice.Franchise agreements vary in size and scope, and are often complex and extensive legal documents.They vary considerably depending on the particular business model and franchise set-up but should aim tostrike a fair balance for franchisee and franchisor, and should deal with the following:-Organisations / parties involvedNature and extent of rights / licence grantedLength of term (and renewal)Geographical territory (and exclusivity)Obligations of franchisor (support and services)Obligations of franchisee (financial, performance data etc)3Fees (initial and ongoing)Brand rights / usage (logos, trademarks, domain names etc)Reference to other relevant documents (eg. operations manual)Ownership of intellectual property of new innovations / developmentsExit / intervention / breach / termination clausesProspective franchisees should pay particularly close attention to the dispute, termination, and intellectualproperty clauses, and aim for absolute clarity on the obligations on both sides. Sometimes, a franchisor willsay that the agreement is non-negotiable, but this is not always the case: especially if it is a relatively newoperation.It is an oft-repeated maxim in franchising that “the best franchise agreement is one that is never used”; butif the selection and matching is correct, the expectations are clear from the outset, the model works, andthe culture and relationships are strong and open, an agreement need be consulted only on renewal.Other documents you will receive on signing the agreement will be the operations manual (probablyincluding quality standards), brand guidelines, and initial marketing materials. You may also agree atimeframe to starting delivery with the franchisor.23Through pro-bono networks such as LawWorks or specialist franchise lawyersFor more detail / explanation of franchise fees, see the Social Franchising Manual (for franchisors).9

6) Being a franchiseeThis final section talks about the realities of actually being a franchisee, and what that means in practice.The most useful concept to introduce here is that of the franchisee lifecycle which tracks stages of thefranchisor-franchisee relationship as it develops. This is illustrated below:4This lifecycle, originally developed by the Australian corporate psychologist Greg Nathan , identifies sixstages of the relationship over time.The franchisee:-Starts off happy, excited and optimistic (Glee)Becomes slightly less happy when money changes hands (Fee)Thinks their success is only down to their hard work (MeWants to break free from the restrictions of the franchise system (FreeEnters frank dialogue with the franchisor, and gets the picture from both sides (SeeMoves to a mature stage of inter-dependence with the franchisor (We)This is helpful for both franchisor and franchisee to know, as it can de-personalise any problems and allowboth parties to see developments as part of a normal cycle. It also emphasises the long-term nature of therelationship, the need for commitment, and the ongoing importance of communication between thefranchisor and franchisee. If you become a franchisee, it might be worth revisiting this as time goes on.You can find out more about Greg Nathan‟s work via the Franchise Relationships Institute:www.franchiserelationships.com410

7) Advice and further information10 key pieces of advice about being a (social) franchisee:1. It is about give and take, and clear communication on both sides a selective franchisor is a goodsign;2. It means they look for the best franchisees;3. Franchises are like the musketeers: all for one and one for all;4. You are a family and one brand: keep criticism in-house;5. You get out what you put in: contribute your learning, innovation and improvements;6. Make use of the central support: ask for help when you need it;7. Keep a keen eye on the twin bottom lines of financial and social;8. Stick at it and be flexible with change: it is a long-term commitment;9. Remember this is a people business: the right people make the system work;10. Investigate the practice and the people of a franchise, not just the paper.Other information:At present, sourcing a social franchise is difficult, as there is no one place where such opportunities arelisted. This may change as networks and associations become established, but it is currently best to doyour own research online (or via particular sectors) or to contact one of the specialist intermediaries belowwho have knowledge of the field and of the current practitioner franchisors.Similarly, there is little support out there specifically for social franchisees; in seeking assistance, thefollowing organisations are those with most practical expertise- FranchisingWorks: programme using commercial franchising for social aims (employability and jobcreation); seeks commercial franchisees in particular www.franchisingworks.org- Social Enterprise UK: conducted research into social franchising, and partnered on social franchisingprogramme with School for Social Entrepreneurs www.socialenterprise.org.uk- School for Social Entrepreneurs: ran dedicated Scaling to Success social franchising programme inpartnership with SE UK www.sse.org.uk- British Franchise Association: the governing body for franchising in the UK, with advice, informationand links to support www.thebfa.org- Community Action Network (CAN): CAN has experience from running the Breakthrough growthprogramme, and commercially within its staff team www.can-online.org.uk- Economic Partnerships: North East-based firm which runs the European social franchising network,and works with social franchises www.economicpartnerships.com- Social Pioneers: Social development agency specialising in public sector innovation and reform, andalso with experience of large-scale replication projects www.socialpioneers.com11

APPENDIX 1: CASE STUDIESThe following four case studies are designed to provide real-life examples of both social and commercial(ethical) franchising, and draw out particular points of learning from that experience. They have beenchosen to represent a diverse mix of experience, organisation, field of operations and learning. Keyinsights are drawn out in the box at the end of each page.The organisations featured are:A) Riverford Organic VegetablesB) School for Social EntrepreneursC) AspireD) Ben & Jerry’s (PartnerShop)12

A) Riverford Organic VegetablesProject / business overview:Riverford Organic was founded by Guy Watson in 1986, and started with packing boxes of vegetablesfrom Riverford, the family farm in Devon. It has since blossomed into a thriving franchise vegetable boxdelivery business, while the farm now also has an award-winning dairy, farm shop, meat box business andField Kitchen restaurant.Alongside the original farm in Devon, there are now regional farms in Cambridgeshire, Yorkshire andHampshire, so that food can be grown and distributed locally. They endeavour for the vast majority of fruitand vegetables to be homegrown and organic.At the time of writing, a Riverford franchise currently costs 12,500 to purchase, an initial 6,000 trainingfee, and an ongoing management service fee of 3% of sales (this does not include the need for van, officeand working capital). Initial franchises are provided for 5 years, and there are currently several around theUK, from Devon to Sheffield, from Warwick to Milton Keynes.Social franchisees experience:Riverford franchisees have all been individuals, and often couples; indeed, the Riverford website statesthat “that the added support that being part of a couple brings can help the business to grow and develop,especially in larger territories”. Most are looking for a career change or a business opportunity in an areathey are passionate about.Melanie Cheung from Warwick was no exception, having switched from a career in managementconsultancy to change her lifestyle and have fewer long trips away from home. She learned about theopportunity with Riverford at a franchise fair and, having done her research on the model, raised thenecessary finance from savings and family. She was attracted not only by Riverford‟s proven model andreputation, but also by the fact that the model involves meeting customers every day and receiving directfeedback.The main challenges for Melanie have been finding reliable drivers, keeping the business rolling alongthrough hard winters, and balancing the competing demands with her family life. Her broad businessexperience allowed her to keep all the other aspects (accounts, sales, marketing) running well, which hasled to a thriving franchise over time.There are often long hours required, but Melanie is an example of a franchisee with both a strong supportnetwork and significant individual commitment. Both are key foundations of her success and the success ofthe franchise.Key franchisee insights:-Source franchise opportunities at dedicated shows and fairsSupport networks are important for the lead person in a franchiseThe customer is always king: even more than the franchisorA breadth of business experience can help with franchise operationsPlease visit their webpage at:http://www.riverford.co.uk/13

B) School for Social Entrepreneurs (Liverpool)Project / business overview:School for Social Entrepreneurs (SSE) was founded in 1997 in East London, and runs year-longprogrammes of training and support for social entrepreneurs. It aims to develop the individual and theirproject in combination, based on specific elements and an action-learning (or learning-by-doing) approach.Social franchisee experience:Having run its original national programme for three years, SSE was funded to run twelve time-limitedyear-long programmes in twelve locations around the UK. This provided „proof of concept‟, and SSE thenbegan to franchise, starting with Fife, Belfast and the East Midlands.As part of its strategy to establish an SSE franchise in each English region (and Scotland, Northern Irelandand Wales), SSE started to investigate potential partners in the North-West; specifically in Liverpool. Ittalked to a number of potential franchisees, whilst negotiating with Liverpool Council for start-upinvestment. None were the right fit culturally or in terms of skills until the Council suggested BlackburneHouse as the potential franchisee.Blackburne House were already an accredited learning provider (Beacon-status college), a thriving socialenterprise and, alongside that combination of education and enterprise, had first-rate networks in the cityand region. From their perspective, they saw bringing SSE to Liverpool as good for profile, complementarywith their other activities, and in-line with their mission (with potential to expand their social impact).Crucially, for both parties there was also a good cultural fit, with strong and transparent relationships fromthe off.Blackburne House also asked a lot of questions about the model, and went in-depth with SSE-UK staffabout all the issues connected to being a franchisee, before committing and signing the franchiseagreement. They also paid particular attention, based on their own experience and that of SSE-UK, to whoran the programme within Blackburne House. Sylvia Pearson, with her expertise, networks and passion forenterprise, and clear communication, has proved to be an excellent choice.Since starting in 2006/7, SSE Liverpool has become one of the most successful SSE franchises, branchingout geographically (to Merseyside and Wigan & Leigh), thematically (running the first dedicated SSEenvironmental programme) and trialling new innovations (as with its work in schools) with ever growingnumbers of social entrepreneurs. SSE-UK has shared the learning from these with its wider network.Key franchisee insights:-Be prepared to wait and test the relationship fitAsk as many questions as you think necessary before signingThe person leading the franchise is crucialPilot new innovations but keep communicating with the centrePlease visit their webpage at:http://www.sse.org.uk/school.php?schoolid 514

C) AspireProject / business overview:Aspire was set up by Paul Harrod and Mark Richardson in 1998 in Bristol to produce a not-for-profit fairtrade catalogue which was distributed by homeless people, who would return to collect orders. The focusof the organisation was to provide full-time employment that moved the homeless away from benefitdependency; to this end, the homeless people were guaranteed a wage based on the hours they worked(not the sales they gained).Initial sales were strong and local support and media coverage helped establish the business. After a yearof operations, Aspire had attracted 4000 customers, generated 150,000 and employed 15 staff; it was notprofitable, but self-sustaining.Social franchisee experience:The Aspire model rapidly attracted a lot of attention, from government and funders. The founders decidedthat Aspire needed to grow to achieve necessary economies of scale, and drew up an ambitiousfranchising strategy in July 2000: this aimed to establish 30 outlets by the end of 2003. 400,000 fundingwas secured, and Aspire Group established to lead the franchising operation.The business expanded rapidly, and nine franchisees, most embedded in existing charitable organisations,were selected and in place by September 2001. This soon grew to 12 franchisees, employing 300homeless people and with sales of 1.3 million. Franchisee selection was swift, and franchisees wereallowed to interpret the business model in different ways.As has been detailed elsewhere many times, challenges soon became apparent (highly seasonalbusiness, huge support needed for the homeless people, small market). Franchisees started to losemoney, now that it was clear that the business model of the business was largely unproven. Severalfranchisees started ancillary businesses to earn money, and relationships grew more strained when thecentral franchisor started an independent direct mail business. Some franchisees viewed this as blurringkey elements of the franchise (agreement), such as the geographical boundaries.Despite further investment, and changes to the business model, Aspire Group gradually declined and by2004 the business had folded. It should not be overlooked that the founders (both very young at the time)and the franchisees achieved a great deal of social impact in this time; indeed, several continued to work inhomelessness. And, though the franchisor subsequently received much of the blame, franchisees have aresponsibility to do their own due diligence on the model, the franchise and its viability.Key franchisee insights:-Due diligence is as crucial for the franchisee; the responsibility is two-wayFranchising is a long-term deal; rapid growth may not be a sign of successThe model needs to be proven, in terms of finance and social impactStrong brand and profile is important, but not the only criterionPlease visit their webpage at:http://www.aspire-foundation.com/index.html15

D) Ben & Jerry’s PartnerShopProject / business overview:PartnerShops are franchised Ben & Jerry „scoop shops‟ (the retail arm of the ice cream company) run bynon-profit organisations. They are provided at a „preferential‟ rate to social enterprises and charities in theUS and UK, in order to help get long-term unemployed people back into employment. By offering jobs andentrepreneurial opportunities, Ben & Jerry‟s have sought to utilise their commercial business for social andcommunity benefit.There are 15 PartnerShops in

Franchising is a long-term endeavour and relationship-based, so it represents a significant commitment, and can be difficult to exit iv. A franchise is only as strong as its weakest member bec