Franchising has been in the news for all the wrong reasons of late. Such is the intensity of the ongoing public and even parliamentary scrutiny that all franchise businesses can potentially be susceptible to some degree of negative flow-on sentiment as a result.

So how can franchises navigate a safe path back to ensuring the strong social and community connections and engagement that are crucial for long-term sustainable success?

One answer lies in the emerging international business trend of ‘Shared Value’, an extension of the established concept of corporate social responsibility.

Essentially, the premise of Shared Value is that the competitiveness of a company and the health of the communities around it are mutually dependent. Shared Value is created when businesses improve their competitive positioning and address social needs at the same time.

The concept of creating shared value was first introduced in the Harvard Business Review and while it shares some of the same ground with Corporate Social Responsibility in ‘doing well by doing good’ what sets it apart is that is actually marries up financial returns with engagement by businesses on social and community issues. While Corporate Social Responsibility is all about responsibility, Shared Value is all about creating value.

It proposes that strengthening the connection between what a company offers and what its customers and community really needs can create value and drive business growth. Through this linking of social outcomes with financial opportunities, businesses can not only survive but thrive, differentiate, and position themselves for long-term sustainable success.

The emergence of the Shared Value trend also feeds into the wider moral issue of weighing up the merits of Good Profit versus Bad Profit, and whether all company profit is in fact good for a business in the long run.

Bad profit is viewed to be made at the expense of the customer in a way that damages goodwill, the overall customer experience and the long-term relationship. Good profit, by contrast, is seen to be made in a way that adds value for the customer, creates goodwill, improves the customer experience and increases the likelihood of a long-term relationship.

These are all important topics for the Australian franchising sector, and the businesses which operate within it, to address, examine and consider, particularly in the wake of one of its most highly publicised and potentially damaging public issues.

Phil Preston, CEO of The Collaborative Advantage and a global leader in the practice of creating shared value, presented at the Franchising Marketing Forum 2015 and you can view his presentation here.

The franchise sector internationally has a long and rich tradition of both innovation and community connection, so is well placed to embrace the challenge of creating Shared Value. Indeed, inspiration can be found right back at the origins of franchising when an ethical sense of value and community service was at the heart of what is believed to be one of the world’s first ever franchise systems more than 120 years ago.

Martha Matilda Harper from Canada was a former servant who toiled at menial work for years before striking out on her own. Martha felt that the chemicals in hair shampoo and other products were more harmful than good so she developed her own hair tonic and opened her Harper Method Shop in 1888.  There is more about Martha in this Ted-ED presentation.