Honza, one of Czech startup Pragulic's tour guides Photo credit: http://hokee.tumblr.com/

published 12 Apr 2013 by Irina Sofranova in Bulgaria, Lithuania 3 minutes 19 seconds to read

Franchising social entrepreneurship in CEE

With the number of social enterprises in CEE and the interest toward franchising concepts on the rise, we might soon expect a boom in the establishment of franchising enterprises

CEE startups social franchising social entrepreneurship Toniic Nikolaus Hutter Renate Goergen FixMix Bulgaria Mania Pragulic czech republic Mano Guru Lithuania

Social what?

“Nearly every problem has been solved by someone, somewhere. The challenge of the 21st century is to find out what works and scales it up.” Bill Clinton was right. So was UNESCO years ago, as it recommended integrating the franchising model into non-profit projects. Nowadays, the first visible franchise results are in place, with many social entrepreneurs replicating and transferring knowledge instead of reinventing the wheel, time over time.

Social franchising as a form of transferring already proven business models was discovered recently as a good development option in Europe. The Social Franchising Report (2012) issued by the International Centre for Social Franchising (ICSF) and the research by the learning network Better Future of Social Economy (BFSE) identify around 63 franchising enterprises in Europe. The U.K. leads in terms of the number of social franchises with 30, followed by Germany with six. 

Apart from the examples outside of the U.K. like Le Mat (Italy), Villa Vägen ut! (Netherlands), GDW SÜD Cap Supermarkets (Germany) and KOMOSIE (Belgium), there has already been a handful of CEE initiatives related to franchising. Barka Foundation for mutual help in Poland, Mania and FIXMIX in Bulgaria, Mano Guru in Lithuania, and B-Fit in Turkey are already implementing successful franchising concepts.

Social franchising is slowly – but surely – gaining popularity in CEE

The startup scene in CEE is booming: Entrepreneurs have the potential to become more venturesome than their Western colleagues; they want to cooperate and grow. However, the concept of social franchising has still not been optimally explored. Some of its advantages are known for a fact: it can bring scaling effects as well as lower concept and execution risks. Yet, there are no visible signals of social franchising being “popular” in CEE. Well, almost.

Bulgarian entrepreneur Borislav Kashchiev (FixMix) seems to be working hard to prove the opposite. Recently, he decided to embrace the franchising concept by expanding the ideas and know-how, which he has been developing for the past five years, beyond the local market, and into Serbia and Macedonia.

Social franchising as a form of expansion

There is a number of social enterprises that have already successfully expanded outside of their country of origin. Budapest-based iCatapult, which helps startups expand to the U.S. or the mentor-driven Startup Exchange Program are already up and running. Besides cost-reduction, shared responsibility and know-how transfer, social franchising brings along a handful of other advantages that might attract young CEE entrepreneurs. Nikolaus Hutter from impact investor network TONIIC points out that “social franchising works for concepts, which have a large core of replicable elements and which can be adapted to local circumstances.” 

An example of entering new markets through franchising is transferring the model of social tourism, as invented by Italian hotel chain LeMat, to Bosnia & Herzegovina. Renate Goergen, European Managing Director of LeMat, emphasises that “social franchising in CEE is a new way for social entrepreneurs to grow. It can help to strengthen, to spread and to replicate well-functioning practices in one country and internationally.”

Franchisers or franchisees? 

Although most social franchisers are U.K.- and Germany-based organisations, there is a number of CEE entrepreneurs who have developed and implemented their own models. One them is Bulgarian Mania, which offers franchising outside of the country. Barka, a Polish foundation supporting social development of excluded groups, wants to spread its model across Europe. Czech Pragulic, who won the SIA award in 2012, also aim to replicate their ideas in other countries.

Goergen stresses that, “it is rather possible to develop good and innovative ideas in the Eastern countries as in the Western. However, to become a social franchisor one must first be a good entrepreneur.” For that reason alone, she believes CEE might be at an advantage. According to the European Franchising Federation (EFF) for 2011, the growth in the franchising field in Europe has been significant. Poland, Sweden and Belgium have shown increasing development, and in CEE there has been an ongoing trend towards establishment of local franchising brands.