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A New Model of Social Enterprise: Master Franchising

September 6, 2013 / old jg

At the Prison Entrepreneurship Program, we just announced one of the most significant milestones in our organization’s recent history … the acquisition of a master franchise for the entire state of Texas by our for-profit subsidiary, the Communitas Auto Group.

(Read more here)

Over the next twenty years, we will develop around 20-30 automotive repair shops under the brand of The Auto-Lab Complete Car Care Centers. These shops will provide hundreds of living wage jobs (many of which will be for graduates of PEP); by 2023, we anticipate they will also grow to provide around $1 million per year in revenue to support PEP’s mission.

Those facts alone are worth celebrating. But there are two aspects of this initiative that get me even more excited… because they are far larger than just PEP.

First, this effort represents a seismic shift in the franchising world. There are fewer than 100 franchise stores that are owned by nonprofits; most are in the food services arena, like Ben & Jerry’s, Nathan’s Famous, Annie’s Pretzels, etc. And in the majority of cases, nonprofits only own a single store.

Through our subsidiary, PEP owns the rights to the entire state of Texas for The Auto-Lab. Within a few years, we will likely own more franchise stores than any other nonprofit in the country.

This will be a game-changer for nonprofits, because we will prove the value that nonprofits can bring to the franchising community as BUSINESS PARTNERS. After all, here are some of the assets that PEP brought to the table that most typical franchisees lack:

A robust governing board and advisory board structure that includes 50+ experienced business leaders whose expertise we can tap to guide the venture’s growth;
Immediate access to a qualified and motivated workforce of strong potential employees and store managers (i.e. our graduates);
Thousands of active relationships with potential customers in multiple cities across Texas (i.e. our volunteers and donors, not to mention our graduates and their families).

The latter is particularly valuable for franchisors. Once we open a store in Houston or Dallas, we will have thousands of people in those markets who already know about PEP and who would be willing to give our store a try. And for a new entrant to the market, that is an invaluable asset to tap.

Further, within each of those three groups above, we have not only potential customers and employees … but potential investors. And more importantly — potential franchisees.

Yes, this venture will provide jobs for our graduates and revenue for PEP.
But the broader impact will be on how we can transform the way
that the franchising community looks at nonprofits.

Thankfully, the remarkable leaders at The Auto-Lab had the vision to see what we could offer. Yet throughout this process of securing a franchise, we encountered a high degree of skepticism from other franchisors about working with a nonprofit (let alone one that worked with felons!). The success of Communitas Auto Group will force other franchisors to take notice … and, we hope, become much more open — indeed, eager! — to engage nonprofits as franchisees.

That is the first reason why I am excited.

But the second makes me even more so.

To fund this initiative, we pioneered a new financial model, with the help of software similar to what is offered by Synario, that we believe could serve as a template for how to finance social enterprises and earned income initiatives owned by nonprofits. Thanks to the guidance of our board and some very wise counsel from one of the preeminent Houston corporate law firms, we have built a model that allows the Communitas Auto Group (“CAG”) to harness the power of private equity while maintaining PEP’s long-term ownership of the venture. This is definitely a step in the right direction, but that’s not to say that we won’t need the help and guidance of somewhere like Sidley Austin in the near future to ensure that we get the advice we need to be successful in our ventures, as well as staying within the appropriate law.

In brief, CAG is incorporated as a for-profit company. As explained in the link at the top, CAG was capitalized with an initial investment from Mike Humphrey of Houston, Texas. Mike is now the majority owner of the venture, but PEP was granted a sizable carried interest in CAG at essentially no cost. There is a mandatory distribution to PEP of $50,000 per year from CAG, and a scheduled buy-back of the equity from the initial investors through the profits generated by the business. This will allow PEP to fully own the company within approximately ten years, if CAG grows in line with our conservative financial models.

Once that occurs, we anticipate that CAG will be contributing approximately $1MM per year in unrestricted revenues back to PEP. That is the equivalent of building a $25-30MM endowment for the organization … only this is one that creates hundreds of jobs along the way for our graduates.

All without relying on philanthropy.

THAT is what is really sexy about all of this. We are blazing a new trail in how mission investors can complement their charitable giving with strategic investments that create both market returns AND social benefits.

And when we can do that … we exponentially multiply the amount of funding that we can access. After all, just look at the world of grant-making foundations. They distribute, on average, 5% of their assets in the form of grants. But the other 95% is held in investments.

By tapping into that 95% … we effectively multiply the base of support available by a factor of 19X.

That’s no different for major donors. However generous they are, the vast majority of major donors have more money in their investment budgets than in their charitable giving budget. By tapping into those far larger pools of capital, we dramatically expand the percentage of “wallet share” that can be tapped by the social sector.

And THAT is something that our team will be very proud to leave as part of our legacy.

Onward!

What if Walt Whitman could have watched the Earth breathe?

August 19, 2013 / old jg

“WHEN I heard the learn’d astronomer;
When the proofs, the figures, were ranged in columns before me;
When I was shown the charts and the diagrams, to add, divide, and measure them;
When I, sitting, heard the astronomer, where he lectured with much applause in the lecture-room,
How soon, unaccountable, I became tired and sick; 5
Till rising and gliding out, I wander’d off by myself,
In the mystical moist night-air, and from time to time,
Look’d up in perfect silence at the stars.”

— Walt Whitman (1819–1892). Leaves of Grass. 1900.

I thought of this poem when I saw the image below, a GIF made from a compilation of 12 of NASA’s Visible Earthimages, one taken each month in 2004. The GIF was posted by John Nelson, a user-experience expert for the software firm IDV Solutions. I learned of it through Upworthy‘s posting of the link here.

Walt, what would you have written if you could have seen this image?

The paths down which we walk within our dreams

March 30, 2013 / old jg

self portrait as a shadow on a prison parking lot

The paths down which we walk within our dreams
have led us to this place we dare not sleep:
this place where waking is not what it seems.

Our words have traveled down the narrow streams
of halting conversation from the deep
chasms carved by weeping in our dreams.

What scribes have caught our thoughts within the reams
of parchment buried deep beneath the keep
that slumbers here where waking shows no seams

against the teaming cauldron of our schemes,
across the patchworked calculus we heap
to bind the paths down which we walk our dreams

like dogs that bark at every light that gleams
within the shadows cast around the sheep
whose dim-eyed waking is not what it seems?

None but these, who prowl upon the lams
to gauge the ripeness of the time to sweep
along the paths down which we walk in dreams
towards a waking state not what it seems.

prison ghazal (#poem)

December 4, 2012 / old jg

licensed via creative commons

A place from which you can’t escape is prison.
A place to which you must return is prison.

The space between the place where you were born
and everywhere you fear to go is prison.

Your shame has strapped a saddle on your back
and whipped your ass to ride you back to prison.

Their faces — all the ones you can’t forgive —
become the guards who lock you in your prison.

Pull back the shades; reveal the fragile glass
that forms the razor fence around your prison.

What taste now aches within your bitter palate?
What sweetness haunts your memory in this prison?

You see your lover standing at the gate.
You wave to her — but turn into your prison.

A big, important question asked by Salah Boukadoum

July 2, 2012 / old jg

“Injustice anywhere is a threat to justice everywhere.” – MLK

My friend Salah Boukadoum is the founder of Soap Hope, an amazing company with an even more amazing mission. In brief, they sell all-natural, organic, high-quality products … and invest 100% of their profits in microloans to impoverished women. Their model — which Salah calls the Good Returns model (click for his TEDxGrandRapids talk on the topic) — can equip any company to generate a sustainable impact on the world at no direct cost to them other than a year of interest.

But that is not why I am writing about Salah. I am writing about him because I was shocked into a stupor by a very poignant question that he asked on Facebook. I post in its entirety below… and welcome your thoughts.

Why, when a skier is lost on the mountain, do we deploy a search party using helicopters and snowmobiles to see if it’s possible to find him and save his life, but we don’t deploy anything for the child whose life is in grave danger in a village in Africa? The skier consciously made the decision to take a dangerous path, but we don’t hold that against him and give up on his life. The child made no decisions, and was just born in a place of grave danger. If we abandoned the skier on the mountain, we would be accused of being heartless and inhuman. But we abandon the child every day.

The reason boils down to who we consider to be in our community. This is the same reason we celebrate when a plant moves from Mexico to Texas, and denounce a plant moving from Texas to Mexico – the job in our community is more important than the job in “their” community. It’s the same reason that a massacre in our country is worthy of a trillion dollar global mission, but a massacre in Syria is not worthy of any action at all. Because “they” are responsible for “their” problems, and “we” are responsible for “ours.” Who counts in the “we” and who in the “they”?

If we are going to express the full potential of humanity, we will need to expand our understanding of our community to include all people, in all places. Because determining the value of a human life on where you happen to be born, or where you happen to be at this moment, is the same as determining the value of human life by rolling dice.

Robert Egger’s advice on how to give a presentation about #nonprofits

May 25, 2012 / old jg

Robert Egger, founder of DC Central Kitchen, founder of CForward

“Just be cool, drop f-bombs & embrace an unwavering faith in the power of #nonprofits to help rebuild the economy & you’re there.”

– @RobertEgger

Land of Non — More than Charity

May 23, 2012 / old jg

Things aren’t always what they seem…

Tomorrow, I am giving a presentation at the Nonprofit Summit hosted by the Nonprofit Center of North Central Florida. I am giving a wide-ranging talk that I am calling “The Land of Non: More than Charity.”

(Thanks to my friend Stacy Caldwell for introducing me to this very appropriate term for the ol’ nonprofit sector. See my first blog about it here.)

My talk will cover three basic topics:

YOUR ORG (“your organization”): How and why nonprofits should stop using the language of “begging” when it comes to fundraising, and focus instead on giving a solid investment pitch (i.e. more like what you see on Shark Tank than on the street corner). I’ll also talk about the difference between thinking of donors simply as sources of money rather than ambassadors in your mission.
1. To illustrate this, I am going to use a version of the Prison Entrepreneurship Program’s “ambassador enrollment presentation” as a case study.
DOT ORG (“the nonprofit sector”): How to reframe our understanding of the nonprofit sector’s role in society by discussing the size, breadth and impact of the nation’s 1.4 million charitable organizations.
OUR ORG (“our sector-wide organizing efforts”): How we can all get involved in changing the dialogue used when discussing the nonprofit sector.
1. To illustrate this, I am going to highlight the work of Robert Egger and his new lobbying organization, CForward

I have about 45 minutes to cover 45 slides. Some will take 5 seconds, some will take 5 minutes. We’ll see how this works out!

For those who attended the conference and are now finding this blog, you can download the presentation here:
Land of Non – More than Charity – by Jeremy Gregg

Finally, here are the links included in this presentation for “Suggested Reading”:

Who will win the nonprofit sector’s 10 million votes?

March 21, 2012 / old jg

More powerful updates from the inimitable Robert Egger, founder of the DC Central Kitchen, and the V3 Campaign … which has been reborn as the even more awesome, and far more powerful CForward (a PAC aimed at endorsing and supporting political candidates who have a strong platform for engaging the tenth of the economy known as the nonprofit sector):

The nonprofit sector employs around 10 million people.

The sector engages another 90 million people as volunteers.

Collectively, the sector controls about 10% of the GDP. In Texas, the nonprofit sector employs more people than the oil industry.

And yet — none of the politicians asking for our vote have ANY plan for how to engage us, our creativity, our passion, our entrepreneurial spirit . . .

Not YET, at least.

Watch this video from CForward. Then join me in donating to support their work.

What dreams do we hold for our neighbors’ children?

November 12, 2011 / old jg

NFTE Dallas

Among the many privileges of my career, I have the honor of working alongside some of the best nonprofits in town. This morning, I was invited to speak to the students of the Network For Teaching Entrepreneurship (NFTE) at their 3^rd annual Young Entrepreneurs Rally.

NFTE is a remarkable organization that is always on my short-list for year-end donations. They are a national nonprofit organization that partners with public school systems to offer a course on business basics and entrepreneurship to students (primarily focusing on children from low-income families). While they have created many entrepreneurs who have grown up to launch successful businesses, this is actually not their primary goal.

Their primary goal is to use the theory of entrepreneurship to build a bridge between the core academic curriculum in the public schools and the way to make money in the real world. It is very hard to get a teenager excited about algebra… but it is remarkably easy to get them excited about making money. Teenagers like the thought of making money, so teaching them from a young age how to save and make money is one way of teaching them important life skills. For example, lessons on maths don’t interest a 15 year old. However, lessons on saving certain amounts of money (perhaps by using coupons like eBay coupons, or selling clothes) will grab their attention for a lot longer.

By building this bridge, NFTE is successfully increasing school attendance, grades, test results and — most importantly! — graduation among a group of children who are at the highest risk of dropping out.

Here is a shocking number: in 2008, Dallas had the nation’s worst dropout rate among cities with over 1 million people.

NFTE Dallas directly targets this problem by connecting one of these children’s primary desires — to make money! — with the necessity of making good grades and graduating. I think that this is a very elegant solution to the otherwise intractable problem of low academic achievement in public schools. When you combine this model with my deep respect for the organization’s board and staff (who will manage to engage over 2,000 kids in their program this year), you can see why I would be so happy to join them on a beautiful Saturday morning for a few hours.

Today’s event was at my alma mater, University of Texas at Dallas. I love driving into the campus, which is markedly more beautiful than when I completed my MBA here in 2006 (thanks to the generosity of Mrs. Eugene McDermott). The tree-lined drive up to the Naveen Jindal School of Management provided a serene backdrop for me to prepare my remarks for the day.

After parking my car and walking up to the school, I finalized my idea for how to present on the topic that I was assigned: “Money Matters: How to Raise Funds for Your Business.”

Sources of Capital
Needs and Wants: Of the Business, and the Business Owner
How much debt can you afford?
Costs of Capital (i.e. basic lecture on the preposterously high rates charged by payday lenders and title loan shops)
Q&A

I only had about 30 minutes for the presentation, so this seemed like a lot of ground to cover — especially because I prefer conversations to lectures. When the students started walking into the classroom, I realized again how hard it can be to be a teenager … regardless of whether you are from a wealthy family or not.

This class of 18 was comprised of students from 4-6 different high schools. Most had never seen each other before. Needless to say, this group of aspiring entrepreneurs was not feeling incredibly talkative when the class began.So, of course, I did not make silence an option. We started by having them brainstorm possible sources of capital. While I have had this conversation many times before, today’s responses shocked me.The first response was “ask a wealthy person.” Then, silence.Finally a second response: “you could start a lemonade stand.”
Basically, the student’s idea was that to fund a larger/riskier venture, you should first start another, less lucrative one that has more of a guaranteed income. Other students agreed — with another idea coming to do a car wash.

I prodded some more. No one had any ideas. Finally, the student who had the lemonade stand idea said: “Maybe a bank?”

We wrote all of these down. And then I mentioned some others, including CDFIs (microlenders) like the PLAN Fund. I then told them that the most common way to fund a business is to raise capital from friends and family.

The response was mostly blank stares and a few eyes rolling. Here I was, a white guy in a suit-and-tie, talking to a predominantly black and Hispanic group of public school students about raising money from friends and family.

The facts are not foreign to me. Around 90% of students in the Dallas Independent School District are on the free- and reduced-price lunch (i.e. their families have incomes less than 185% of the federal poverty level).

Later, when we were talking about the students’ ideas for businesses, one soft-spoken girl in the back row raised her hand. She said that she had a business idea but that it would “not be something that people in my community could afford,” and she wanted to know how she could learn about building a business, whether it be an internet sharing business (https://www.rmhbangor.org/how-to-start-an-internet-sharing-business/) or anything else, to serve the wealthier demographics of other communities.

It was a fair question. In many ways, it is no different than any other entrepreneur asking how to learn about accessing a new market where they have little knowledge or few relationships. But somehow, all of the lessons that I learned in this very same building about “expanding businesses into new markets and geographies” did not apply here.

Her question did not just arise from curiosity about opportunities in new areas.

It sprung forth from the same source that caused many of these students to roll their eyes at my proposal that they could raise initial funds from their family and friends:

It arose from these children’s basic self-definition as being outsiders. Being “low-income,” or — worse — “at-risk.”

Instantly, my thoughts turned to my own daughters. I could not imagine them ever self-identifying as “at-risk” for anything other than physical health problems handed to them by their genetic code.

Yet here was this girl — someone else’s child, the daughter of a stranger — who could not fathom her community providing her with the initial support to launch her dream . . . let alone the on-going support to sustain it.

As she spoke, heads nodded around the room. This was not just about this girl. This was about all of these children, and the thousands more who fill the classrooms of the DISD each day.

What dreams lie within their hearts, unspoken for fear of watching them die? How many amazing entrepreneurs, artists and leaders lie hidden even from themselves because of an inability to see a path for their talents to be utilized?

What dreams do we hold for our neighbors’ children? for those whom we will never meet, yet whose lives are so intimately tied to our own that we cannot truly separate our own dreams from theirs?

What Dallas do we imagine handing over to the next generation — one in which opportunity is allocated merely by selecting the right parents, or one in which the dreams of every child are provided rich soil in which to grow and mature if provided the right love and care by their owner?

I do not know. But I do know this — the work of NFTE, the PLAN Fund, and hundreds of other local nonprofits all give me hope that the answers to those questions will be better for the children of the children with whom I spoke today.

But that is not enough. We cannot write off entire generations of children under the banner of “slow and steady progress by the charitable and educational institutions” of our community.

We need business leaders to volunteer with NFTE to walk into these classrooms and inspire these young people to believe in themselves. We need them to mentor these kids — not just throw canned goods at them through food pantries and keep them locked in free after-school programs during the hours when we don’t want them out on the streets.

We need to dream not just of our own future, or of the futures of our own children, but of all children. We need to collectively will our community into achieving its own potential, which can only be the case when there is no child whose greatest barrier to their own success is their inability to believe in themselves.

The Future of Marketing: Predictions For 2012 on Social Media Marketing

November 9, 2011 / old jg

There are many different kinds of marketing tools out there, from Salesforce customer service chat tools to the wild west that is social media. Social media and marketing initiatives related to it can be difficult for one to wrap their head around. Seemingly lighting in a bottle, successful social media campaigns can be difficult to replicate if one does not know what makes it successful.
Business 2 Community is an “independent online community focused on sharing the latest news surrounding Social Media, Marketing, Branding, Public Relations & Much More.” With this site, marketers are hoping to gain better insight into social media marketing campaigns.

The site recently included me as one of its “46 experts on marketing” in the article, The Future of Marketing: 46 Experts Share Their Predictions For 2012. Here was my contribution:

The future of marketing will be turning your customers into your salesforce. The initial foray into this area has begun with retailers offering discounts to customers who can prove that they “checked in” to their store on Facebook, Foursquare, etc. We are also seeing more and more campaigns that provide incentives for connecting to a company’s social media presence.

This trend will continue, and possibly extend into the “rewards card” programs; customers could be rewarded over a long-term basis by attracting
other customers who use these cards; many grocers have been doing this for years with their nonprofit partners (i.e. donating 1% of purchases to a charity whose donors register their rewards cards with that charity’s number).

Webinars as an educational and marketing platform saw a huge rise in popularity in 2011, and will continue to grow in popularity in 2012.

Read the whole article here:
http://www.business2community.com/marketing/the-future-of-marketing-46-experts-share-their-predictions-for-2012-088529

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