Community enterprise development

Franchising can be a powerful connector between existing resources and those needed from outside to stimulate job creation and wealth retention within communities.

By Kobus Oosthuizen

Wikipedia defines a society, or a human society, as a group of people related to each other through persistent relations, or a large social grouping sharing the same geographical or virtual territory, subject to the same political authority and dominant cultural expectations. Examples include clubs, church groups, educational groups and ex-employment groups such as firemen and war veterans.

Insofar as it is collaborative, members of a society can benefit in ways not possible/achievable on an individual basis. The establishment of an enterprise initiated by a society and aimed at providing goods or services to such a society is a powerful mechanism for employment creation and wealth retention within a community. This is especially true if a suitable ownership structure and business model is utilised.

The creation of local job opportunities remains the most effective means of retaining wealth within communities. Utilizing the business format of franchising to create sustainable small businesses provides an effective means of reaching these objectives.

Communities often don’t realise that they actually already own most of the assets; the market, communication networks, location and people required to establish small enterprises within their hamlet. The funding required to procure the ‘hardware’ to establish a community business, provided a business system and case exist, is the part of the process which can be managed.

Assuming the society can serve as its own primary market for a community-owned business, that funding can be arranged and a suitable location can be sourced, the only other ingredients required are a business model and a qualifying operator. The fact that the community ‘owns’ and supports such an enterprise will contribute greatly to its sustainability.

Franchising, with its hundreds of tried and tested business models, provides an effective and sustainable alternative for introducing goods and service ‘brands’ to communities. Co-operative franchised models are not limited to specific sectors or brands. Any goods or services for which a demand exists within a community on a scale large enough to support a local enterprise, would have potential. Examples of such local enterprises include bakeries, butcheries, grocers, fast food, hardware and building supplies, tool hire, beauty services, funeral services, education, financial services, health care, kids’ entertainment and tyre and exhaust services.

Co-operatives can easily develop into a political challenge if the rules and authorities are not established and entrenched at the outset. Joint ownership, while good for broad-based empowerment, may have a negative impact on sound managerial principles and the effective implementation of a business plan. Here franchising provides a workable solution as the business system and related operational procedures are prescribed by the franchisors and are not affected by individual preferences, interests and agendas.

As with any other commercial franchise arrangement, the selection, induction and training of a suitable operator will probably be the single most important step in the process. In the community franchise structure, however, the operator is not only accountable to himself, as is the case with the traditional owner-operator scenario, but he/she is also accountable to the society. In such a case, a senior member of the society, capable of representing the interests of the community, must be appointed as the custodian of the business. As per the standard franchise arrangement, the franchisor would have an obligation to monitor the operational standards of the business and report non-compliance to the custodian.

By virtue of the existence of a franchise agreement, the franchisor can also play an important role insofar as the impartial and independent selection and appointment of the executive head of the business is concerned. While the community may own the enterprise and while a number of community members may be involved as employees, the management of the concern should vest in a single person who is willing, experienced and qualified to take up the challenge. The franchisor may also assist with the appointment of appropriate staff based on their suitability to perform their duties rather than their standing within society.

The recent government legislation allowing for easier formation of co-operatives, as well as the grants available from the Department of Trade and Industry (DTI) for the specific purpose of establishing co-operative businesses, is an indication of the approval/backing enjoyed by co-operative ownership structures.

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kobus@safw.co.za

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