Franchises and federations: the economics of multi-site nonprofit organizations

This chapter examines the economic and organizational factors underlying the formation, structure and functioning of multi-site nonprofit organizations. We characterize such organizations as associations in which the members are themselves organizations rather than individuals. Multi-site nonprofits are manifested in various forms including federations, franchises, membership associations, systems, leagues, decentralized corporations, and networks. Such organizational structures are seen as mechanisms for nonprofits to achieve efficient scale in promulgating their missions and services. Various growth scenarios are considered including expansion, imitation and affiliation, and agglomeration and networking of single cell organizations over time. The particular structures that these organizations assume are determined by a variety of factors including economies of scale and scope, transactions costs, principal–agent considerations, and inter-organizational externalities. In light of new technologies, the study of inter-organizational networks is seen as an important frontier of research on multi-site nonprofit organizations.