Get stuck into franchising and boost innovation

Historically, one way to spread a team’s capacity has been through a merger. But mergers have endemic problems that actually stop innovation for years while logistics get in the way.

Another model that is attracting interest in the sector is franchising.

‘Franchising could be a way of ensuring that high quality care spreads, that the service is expertly governed and is the best use of public money’

Franchising healthcare has had some bad press in the UK because of two high profile attempts to use the “brand” to privatise or secure investments: the Hinchingbrooke Hospital case and the attempt to market the NHS overseas. 

All the same, George Eliot Hospital in Nuneaton was recently given government approval to seek a partner to run it as a franchise, with the process to be complete by next summer.

Increasingly, decision makers are seeing franchising as a solution to managing individual trusts, primarily those in financial trouble.

What is franchising?

Franchising could be a way of ensuring that high quality care spreads, that the service is expertly governed and is the best use of public money. However, the NHS needs to learn lessons from where franchising has been effective, both outside the NHS in the UK and within other health systems around the world.

‘The concept has been around for a very long time and used extensively in certain sectors which itself implies a level of success’

Franchising is most common in the retail sector, where a business develops a “how to” manual for a branded service/product in order to improve its reach and “signs up” other businesses to trade the service or product under its name.

The concept has been around for a very long time and used extensively in certain sectors − notably the restaurant sector − which itself implies a level of success.

For the franchisees, who are usually entrepreneurs seeking to establish themselves in a safe way, they can break into a service or product area where they might not have the level of knowledge they need by getting significant support and training. They are also highly motivated to make it work because it is their own business. 

For the franchisor it allows rapid expansion with minimal investment cost − the franchisee pays upfront as well as an ongoing royalty. A well managed franchising network can boost the potential of innovation in the brand so long as the franchisor forms a developmental relationship with the franchisee, making the most of their ideas.

Disadvantages of franchising

The disadvantages are quite obvious. It is not always easy to develop a “manual” and control quality at a distance from the parent organisation and tensions between the entrepreneurial franchisee and the franchisor can go both ways − the franchisee can add ideas or it can be seen as trouble. There are some factors to balance and boundaries must be managed in order to make the model work for all parties.

There is one significant tension built into the model that is critical for the NHS if it is to develop more franchised services. Tension often forms between the franchisor’s business model, which is built on standardisation, and the desire in the franchisee to achieve its own identity and “personalisation” in the sense of a community service.

‘Having franchisees that are developmental can be a real benefit − a catalyst to innovation for the franchisor’

This is a legacy of the NHS, as it is the exact same tension that is built into the relationship between a foundation trust and the Department of Health, for instance. And it is a tension that hasn’t been resolved or well managed in the NHS to date.

One way of using this tension as a positive dynamic for both parties is by encouraging and facilitating the franchisees to network together and develop their ability to lobby and manage the franchisor. Having franchisees that are developmental can be a real benefit − a catalyst to innovation for the franchisor.

In addition, franchisee partners can take new franchisees under their metaphorical wing in order to help the franchisor manage the overall network. A simple step such as setting up a franchise association rebalances the power between franchisor and franchisee, making it more equitable and sustainable.

Franchising in Canada

Appletree Medical Group is a multidisciplinary community based medical group in Canada that has used franchising successfully to expand from 10 to 36 clinics in just four years.

The provider has developed a model for medical clinics that oversee the management of GP, cognitive internal medicine specialist and paediatric practices through the application of consistent training and delivery of administrative functions and management around the doctor’s practice, while preserving the autonomy and independence of the doctor.

In effect, everything is franchised except the doctor’s consultation. The logic for doctors lies in that when they join the group they have much more time to care for patients, as the model has reduced their administrative burden. This would seem obvious but it has also reduced overall costs as the cost of doctors running administrative systems themselves was much higher than when Appletree was managing it.

Data management has also improved through the use of an electronic medical record system that connects all clinics, providing the carer with instant access to the patient’s records no matter which location they visit.

Franchising in the UK

The Centre for Innovation in Health Management recently hosted an international workshop on the potential of franchising in healthcare. A group of chief executives from the NHS, social enterprises and third sector came together to discuss the business models in use for their organisations and the potential for franchising as a new model to build upon.

‘Franchising is not appropriate for the whole health service, but if you have a solution to distribute then it could be a good option’

What emerged was that some organisations are already franchising some aspects of their business. The fallacy is to assume that your whole model needs to be a franchising model.

Social enterprises and foundation trusts are looking at spreading their innovation in certain aspects of services, where they have a discrete and clear level of know-how that can be described to others and replicated. Franchising is not appropriate for the whole health service but if you have a solution to distribute then it could be a good option.

This means that the leaders of large NHS organisations need to know what business model works best for what aspects of their services. There is no “one size fits all” when you are dealing with diverse, disparate personalised services.

Franchising the back office work for a GP practice is very different from the NHS’s wholesale experiment with franchising at Hinchingbrooke.

If you recognised some of what you do in this article we would like to hear from you as we are developing a community of practice with chief executives looking for ways to spread and share franchising innovation in the NHS.

Professor Matthew Robson is professor of marketing; Becky Malby is director and Becky Gunn and Alison Green are visiting researchers at the Centre for Innovation in Health Management. If you wish to participate in this research, email Becky Malby