Creating employment through franchising
Franchises and other 'structured business formats' (SBFs) such as licensing, direct selling and agency distribution agreements are growing fast in the UK and other parts of Europe. The CREATE EQUAL project aims to break down the barriers to franchising and turn them into a tool for creating employment among disadvantaged groups and the social economy.
In 2004, there were 720 franchise networks employing around 330,000 people in the UK. According to the NatWest Bank / British Franchising Association survey in 2002, nearly all of these networks had vacancies and problems with finding suitable franchisees. Buying into a franchise is also less risky than starting a standalone small business. Nearly 90% of franchises are still trading after three years, compared to only two-thirds of normal start-ups. But there are still significant barriers to overcome. For example, the project's research shows thaat only a third of franchisees are women, and the cost of buying into a franchise is a major barrier to many potential franchisees.
CREATE is working to open up this growing business opportunity to a wider public. One of the ways it does this is by making information and support available to groups who face discrimination in the labour market through direct advice, training workshops and a website. Secondly, the project says that many business advisers are not aware of what SBFs are, how they work and how they could be extended. So it also provides training, a series of web-based tools and has developed nationally recognised standards for business advisers. Finally CREATE works directly with existing business owners and social enterprises who are considering using a SBF as a way of growing their business.
In this way, CREATE is trying to build a link between the recommendation in the EU's Integrated Guidelines for Growth and Jobs which refers to the creation of 'a supportive environment for SMEs' and the recommendation which refer to 'inclusive labour markets'. The project is delivered by a unique partnership made up of experienced business support organisations, franchise organisations and organisations representing disadvantaged target groups.
Spreading the franchising message to disadvantaged groups
CREATE has been working for six years, during both rounds of EQUAL, to help disadvantaged groups increase their awareness and understanding of the opportunities offered by franchising.
- In round one of EQUAL, 85 companies received support from CREATE and 2,640 individuals took part in the programme, almost three times the original target. Among disadvantaged groups, the project has had most success at reaching those from ethnic minority backgrounds with 34% of participants. Women were 37% and over 50s 29%.
- In round 2, the project is building on this work and focusing on further improving the capacity of business support networks to advise on franchises. It also goes further with franchises for social enterprises and creating new opportunities for low-cost entry to SBFs.
The project is developing a Resource Guide and Directory for Disabled Entrepreneurs and a business adviser training programme. Finally a number of partners like the Franchise Alliance and the British Franchise Alliance are providing a range of seminars and workshops specifically targeted at disadvantaged groups. However, they recognize that there are still many hurdles to overcome to ensure a wide participation of different social groups.
Toni's story demonstrates both the advantages and the difficulties of taking on a franchise. At the age of 54, Toni has set up a new business in Devon called Barking Mad that provides an alternative to kennelling for dogs in her area. It's a direct copy of the original Barking Mad, developed in Lancashire by Lee. Lee now has 30 franchisees, run by people ranging in age from 26 to 70. Toni did some research into franchising and attended a CREATE seminar.
- "I found the seminar really interesting," she says. "I'd looked up a bit about franchising on the internet, but the seminar gave a lot more information about what to look for." Toni had a very clear idea of her budget, based on a legacy she had inherited from her late father. Her initial investment in the franchise was £12,500 (EUR 15,600). "For me, that is a huge amount of money," she says. "I had £8,000 from my dad's estate, so I had to borrow the remaining £4,500. I am paying 10% of my turnover each month as a franchise fee."
- "The first six months have been very hard work. Be aware that for the first year you'll need some other income support. I expected to take money out by month six. It hasn't happened." She says "the upside has been that I love the job and the franchisor has been very supportive. The way I was shown the ropes in the first week of training was very good", she says. "This is the first time I have ventured into franchising and the system is all there for you. You just have to learn what to do, and do the marketing and then get going."
In addition to opening up franchising to a wider public, CREATE and its partner Community Action Network (CAN) are working to assist social enterprises and not for profit organisations to test and adopt social franchising as a growth strategy. CAN used its innovative Beanstalk programme, which was designed to help social enterprises grow more quickly by exploring the opportunities for franchising their activities. The programme provided strategic and business advice and support using experienced high-quality professionals from social, business and franchise backgrounds. Enterprises involved include The Big Issue, a paper run by and for homeless people, the award-winning Community Foster Care and successful legal-aid specialists 'Law For All'.
Hidden Art, based in the East End of London, is a not-for-profit membership organisation that supports and promotes designer-makers, while offering companies and members of the public access to original design. CREATE assisted Hidden Art to franchise their business idea. It now supports over 1,800 designer-makers and has helped build links between the creative and manufacturing industries and their clients. Dieneke Ferguson, Chief Executive of Hidden Art, explains how CREATE helped them to grow:
- "After the success of developing Hidden Art in London we were getting a lot of requests from designers in other areas of the UK and beyond, about developing similar operations there. We really needed advice on how best to grow the company. I attended an event jointly organised by the Community Action Network and Business Link Hertfordshire. This highly instructive seminar explained all the different routes to growth - organic growth, licensing, franchising.
- "But it was important that any franchising operation took on board the philosophy behind Hidden Art - tapping into local resources, and putting these resources to their best creative use to benefit designers and their local communities. The fact that any profit made by Hidden Art has to be reinvested in the company meant that a franchise would have to reflect the 'social' nature of our operations. The help of Robert Looker (CREATE's Franchise Manager) proved to be invaluable in deciding what was important, the recruitment process and scrutinising the business plans. He combines an understanding of the commercial benefits of franchising with the needs of social enterprises. We are now looking at setting up Hidden Art franchises in Newcastle, Birmingham, Wales and abroad."
Franchising on the net
CREATE's work is underpinned by a fully accessible website - http://www.createproject.org.uk - developed by Netcel, which provides online learning workshops and a dissemination platform. Netcel has been developing integrated e-business solutions since 1995, but the experience with CREATE has increased their knowledge and skills surrounding web accessibility. "We had the opportunity to talk to and work with other organisations through the CREATE partnership, such as the Blind Business Association Charitable Trust about issues faced by people with disabilities when using web sites" says a representative from Netcel.
The website contains all the e-learning tools developed by CREATE. The training materials don't leave anybody out. There are self-assessment tools and workshops on franchise for individuals considering starting-up a franchise, a Franchising Suitability Matrix for business advisers and a business growth model for social enterprises and enterprises wishing to grow. Policy makers have also their own section to find out more about the CREATE project.
A platform to support alternative route into business
One of the keys to CREATE's success is a strong network which pulls in mainstream business support providers, franchising organisations and representatives of disadvantaged groups. The partnership is led by Hertfordshire Business Centre Services , market leader in developing support packages to small and start-up businesses and the Business Link Operator in Hertfordshire. CREATE embraces mainstream business support through the Small Business Service, the UK's national agency for start-ups and the National Federation of Enterprise Agencies, the lead representative body for Enterprise Agency network in the UK. It draws in and uses sector expertise through franchising organisations such as the British Franchise Association, the Franchise Alliance and http://www.whichfranchise.com, and for the Direct Selling sector through the Direct Selling Association.
From the outset, organisations representing the target disadvantaged groups have been involved. The Prince's Trust, which provides advice and grants to young people wishing to start up a business, says "The CREATE partnership has grown in numbers and expertise since its inception and it is this knowledge base and joint working that the Trust values most". Other partners include PRIME, a national organisation supporting people over 50 to get into self-employment, EVERYWOMAN LTD and TIE, a multinational organisation to promote entrepreneurship among ethnic minorities.
As the project developed, more organisations have joined the group to enhance the experience in issues such as social format franchising (CAN, the Community Action Network), disabled people and entrepreneurship (the Blind Business Association Charitable Trust BBACT) - an organisation established to assist and support blind and partially sighted people into self employment - and the Association of Disabled Professionals, a network organisation of disabled entrepreneurs.
So CREATE is now in a good position to spread its findings, products, tools and services. In Round 1 of EQUAL, CREATE delivered a programme of work for the East Midlands Development Agency (EMDA) and is now doing the same for the East of England Development Agency (EEDA) (1). The East of England Region has one of the UK´s lowest levels of people aspiring to set up their own companies, but EEDA has recognised that CREATE can make a difference. David Marlow, EEDA chief executive, says: "CREATE will remove the obstacle of where our region's new businesses should go for advice. It will be the first stop for any group who wishes to start a business venture. It is essential that we increase the number of new businesses in the region".
Robert Looker, CREATE Franchise Manager, says "The contract (with EEDA) is a crystallisation of CREATE´s work. Throughout 2006 and 2007 CREATE+ will be delivering a region-wide programme of awareness and skills training. We know CREATE is developing good services, in this new phase that will link in with the new and evolving business support structures in the UK at national and regional level".
In addition, CREATE has developed new tools currently being used by mainstream organisations. Their re-developed Franchisee and Franchisor Guides are now being used by the Small Business Service, the national agency responsible for start-ups in England.
CREATE has also developed standards for business advisers. These establish a checklist of what business advisers should know, such as helping clients to understand the pros and cons of different SBFs and preparing clients to meet any entry criteria required by the organisation. These standards are to be integrated into the UK's National Business Adviser standards.
See CREATE website
DP name: CREATE+
DP ID: UKgb-96
National Partners: Hertfordshire Business Centre Services LTD; Community Action Network; Small Business Service
- GO! Unlimited (EL)
- Wirtualny Inkubator Gospodarki Społecznej (PL)
- Glocal - Empresas Locais com Orientação Global (PT)
 Over the next 18 months CREATE will deliver around 50 workshops on franchising and direct selling, start-up awareness or on business skills, and 15 events for rural communities with a total of over 1,000 beneficiaries being engaged and supported. 3 business start-up enterprise shows and 6 briefing seminars with key influencers and intermediaries are other elements of the programme that CREATE will deliver in the EEDA Region.