A lot of businesses use franchising to expand their reach but rarely has a nonprofit business association tried it – until now.
The Los Angeles County Business Federation – a Commerce-based association of business organizations that specializes in regional advocacy under the newly modified BizFed LA moniker – has over the past year launched its first franchise venture. It has licensed its name and provided guidance on business structure and operations to a newly-formed business coalition called BizFed Central Valley, which started from scratch nearly two years ago. I
The Central Valley oufit began getting help from BizFed LA last year and formally launched earlier this year. It now has 36 member business organizations in five south San Joaquin Valley counties – Kern, Kings, Tulare, Fresno and Madera. The member organizations combine to represent roughly 20,000 businesses that employ a total of about 300,000 people. BizFed LA has been contributing the services of its chief executive, Tracy Hernandez, and some of its staff to help get BizFed Central Valley off the ground.
Terms of the arrangement were not disclosed.
BizFed LA, which began 11 years ago with a goal of serving as a political counterweight to the Los Angeles County Federation of Labor, now has 170 member business organizations, representing 390,000 employers with 3.5 million workers.
BizFed LA has lobbied in Sacramento and at city halls throughout Los Angeles County against bills and ordinances it has considered harmful to the local business climate – such as minimum wage increases – and for legislation that might boost the local economy. BizFed LA also has endorsed candidates for local office deemed by the group to be business-friendly.
BizFed has racked up some successes, including an effort to keep the lucrative Los Angeles Air Force Base from being shut down. But it failed to stop most of the living wage and minimum wage increase ordinances that have come up in recent years, taking labor costs up.
Business leaders in the south San Joaquin Valley who have long lamented being overlooked in Sacramento and Washington. The August unemployment rates for the five counties in the area ranged between 6.2 percent and 8.9 percent – significantly higher than the statewide average and L.A. County rate, both at 4.5 percent.
“We have seen a lot of decisions being made that impact the businesses in the Central Valley without a strong collective business voice from the Central Valley,” said Cindy Pollard, director of public affairs for Bakersfield-based Aera Energy, one of the founding member companies and chief investors who ponied up undisclosed sums to launch BizFed Central Valley.
Three of the other four founding members of BizFed Central Valley also come from the energy sector, not surprising given the prevalence of oil exploration in the region: Western States Petroleum Association, Chatsworth-based California Resources Corp. and San Ramon-based Chevron Corp.
Pollard said she was working in her prior post as president of the Greater Bakersfield Chamber of Commerce when the idea of BizFed LA franchising its name, structure and expertise came up.
“We figured since BizFed LA was already doing this successfully, there was no need to reinvent the wheel,” Pollard said.
That’s the reason behind a trend in the broader nonprofit world toward licensing out business models, according to Regina Birdsell, chief executive of the Southern California Center for Nonprofit Management.
“Ever since the Great Recession, nonprofits – especially those in the social service sector – have been willing to pay license fees to use a successful business model that has already been developed,” Birdsell said.
Others see a longer track record among nonprofits.
“This is a brilliant, time-tested model, adopted by United Way, Goodwill and Boys & Girls Clubs,” said Adlai Wertman, professor of social entrepreneurship at the USC Marshall School of Business. “But the pitfall of an arrangement such as this would be if one of these franchisees does something bad –if there’s embezzlement, for example – it reflects badly on the entire brand.”
Temp work for Hernandez
Hernandez’s current role as chief executive is temporary until the BizFed Central Valley board can choose its own chief executive sometime next year.
Lois Henry, BizFed Central Valley’s advocacy director, said the biggest challenge so far has been explaining the BizFed concept of an association of business associations to other business organizations. “Chambers they understand, but this BizFed concept is unique,” she said.
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