Social Impact Investing Is Evolving in the U.S. Market - But Not Enough
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Social Impact Investing Is Evolving in the U.S. Market - But Not Enough

Social Impact Investing Is Evolving in the U.S. Market - But Not Enough

As noted in my previous article (Social Impact Investing Shows Up in International Social Franchise Programs), there are many examples of how social impact investment has facilitated the use of the social franchise model - permitting social/micro-franchisors and franchisees to scale their businesses, allowing them to employ local residents, serve more customers, and improve the economic health of local communities in an international context.

In the U.S., there is compelling evidence of interested parties having examined the feasibility of using the business format franchise model in low-income communities on a "for-profit basis" to 1) reduce the leakage of employment and buying power to surrounding communities, while 2) building an economically beneficial business presence in the local market. In this article, I report on some of the case studies, evaluations, and programs supporting this premise.

There is sufficient evidence of franchises that can fill the gap between existing businesses and the lack of healthy food, retail, fitness, and basic business services in demand in underserved local markets. There also are examples of franchisors who have unilaterally implemented programs facilitating the training and qualifying of employees interested in becoming franchisees.

In the U.S., there appears to be little reported and accessible evidence of how low-income communities, impact investors, universities, government agencies, and franchisors have worked together in markets to bring trained and qualified local entrepreneurs the opportunity to operate franchised businesses in the areas so in need of attention. More specifically, there appears to be a lack of evidence of 1) how finding, paying for, and maintaining resources to support the training and eventual qualifying of a local entrepreneur can be allocated and shared among the franchisor, community developers, impact investors, universities, and government agencies; and 2) how that revenue can be allocated and shared among the same parties in a fully "for-profit" environment.

I hope the examples in this article will act as a catalyst to cause further engagement in building a shared network of resources to foster and scale programs that result in trained, qualified local operators in low-income and under-developed markets in the U.S.

Boston's Neighborhood Restaurant Initiative

In an effort to revitalize low-income or commercial areas, the City of Boston launched the Neighborhood Restaurant Initiative in 2004. The initiative, which included locally owned franchised businesses, focused primarily on developing full-service sit-down restaurants in neighborhoods lacking access to them.

The initiative, which provided resources for developing new and expanding full-service restaurants included technical assistance (creating business plans, choosing a location, marketing); permitting and licensing; design assistance (signage, logos, and storefronts); facade improvement grants; liaisons to city departments; financing (direct assistance and referrals); and workshops for potential restaurant entrepreneurs. The initiative also provided additional funding as a junior loan for qualifying businesses.

Chick-fil-A's employee development programs

Despite remaining closed on Sundays and facing national public relations controversies in the past few years, Chick-fil-A has continued to scale successfully, exhibiting tremendous market share growth in the limited-service chicken segment. Chick-fil-A is known to focus on a long-term, holistic approach to supporting employees that includes core values and team member training and development.

The company's Remarkable Futures Scholarship program directs a portion of its proceeds to annual scholarships for employees to attend colleges and universities. Every employee that qualifies receives a pre-determined amount of scholarship money. Since the program's inception in 1973, Chick-fil-A has given more than $34 million in scholarship money to 34,000 employee team members.

Chick-fil-A also offers the Jumpstart Experience leadership development program, an intensive job opportunity and personal development program that gives employees a "jump start" in their business careers. This program requires that participants have graduated from a four-year college and have exhibited at least two years of leadership experience. Each participant undergoes a demanding, 30-month program that includes hands-on experience in running all facets of a company restaurant, individual mentorship opportunities, and life-planning assistance.

B. Good: How a smaller brand can offer local economic benefits

B. Good is a regional all-natural burger and sandwich franchise restaurant network operating in Massachusetts, Maine, New Hampshire, New Jersey, Rhode Island, North Carolina, and Connecticut. Its menu features locally sourced seasonal ingredients for all of its beef and produce. The franchise's costs do not appear to be significantly higher than regular, non-locally sourced fast food restaurants because the company uses whole food products and prepares the products on site. The company also focuses on building networks with a growing list of local farmers and plugging them directly into their supply chain. To maintain a unique list of ingredients and products in the face of obvious sourcing challenges, B. Good has a limited menu with a reduced number of offerings, compared with other fast food restaurants. Its flexible menu highlights ingredients unique to each franchisee's local market. While B. Good does not have the geographic presence or numbers of a Chick-fil-A, the company is interesting because of its flexibility, and provides a good example of how franchises, although in a smaller network, can offer the same local economic benefits as independently owned businesses and larger franchised chains.

Domino's "Deliver the Dream Program"

Domino's "Deliver the Dream" program provides financial support and technical assistance to Domino's minority team members who desire to become franchisees. The program identifies and develops high-performing, elite minority team members regardless of where they began with the company. Domino's also partners with outside resources to facilitate financial assistance for selected members. This partnership has allowed participants to start franchises with a significantly reduced franchise fee. Domino's offers several other programs that serve as feeders for this program, including optional training programs for employees interested in becoming managers; and the Franchise Management School for employees interested in becoming franchisees and operating managers.

 Next time: Social impact investing in Georgia's Hollowell Parkway Corridor and the public-private partnerships making it happen.

 Joyce Mazero, a shareholder with Polsinelli PC, a law firm with more than 825 attorneys in 21 offices, is co-chair of its Global Franchise and Supply Network Practice. Contact her at 214-661-5521 or jmazero@polsinelli.com.

Published: January 10th, 2019

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