For&From: Inditex Group’s Social Franchise

Case study1

For&From: Inditex Group’s Social Franchise

Carlos Piñeiro, head of Inditex Group’s Social Investment, wrestled with himself as he reviewed the results of the
For&From chain he had to attach to the company’s Annual Report. This chain “for unique people from unique
people” had just celebrated its 15th anniversary, and, over its life span, it had certainly come a long way. From
selling 10,000 garments and creating 12 jobs for mentally-challenged individuals during its first year in business,
For&From had moved on to selling over a million garments across 13 dedicated stores and offering more than 150
job opportunities.
Piñeiro truly believed that this social franchise scheme was mature enough to embark on a path to greater growth.
However, it still faced some opposition inside Inditex. Global brand management entailed some serious
reputational risks: in the age of social media, any mishap could go viral and become internationally visible in a
matter of minutes. This robust textile conglomerate regarded its brands as its most valuable assets and
safeguarded their use zealously. As a result, some group executives preferred to stick to traditional philanthropy
efforts, rather than venturing into more high-profile social projects. The idea to support “social outlets” with a view
to promoting handicapped people’s labor inclusion lacked unanimous backing. In turn, others thought the potential
of this social franchise to deliver a positive impact on society proved substantial. Piñeiro wondered if the time had
come to expand this chain in Spain and even to replicate this scheme in other countries.

Inditex Group’s Background

The group called Industria de Diseño Textil, S.A. ("INDITEX") encompassed eight retail formats with extensive
international operations (see Exhibit 1 for a map showing Inditex’s major markets). Zara, the Group’s oldest store
chain (see Exhibit 2 for a list of Inditex’s eight brands), raked in 70% of Inditex’s sales via 2,162 stores across 88
countries. By late 2016, Inditex owned 7,013 stores around the world and operated online in 42 countries. Up 10%
as compared to the year before and amounting to a net income of €3.157 billion, sales in 2016 totaled €23.311
billion, turning Inditex into the world’s best-selling fashion player, ahead of both Sweden’s H&M and Japan’s Fast
Retailing (Uniqlo). The Group employed over 162,450 people around the world, with women accounting for 74%

1This case was prepared by Ezequiel Reficco, associate professor at Universidad de los Andes (Colombia) and
Alfred Vernis, lecturer at the Department of Strategy and General Management at ESADE-Universidad Ramón
Llull (Spain).

The case has been developed as a basis for discussion in the classroom and is not intended as an endorsement,
or a primary data source, or as an example of good or poor management. Please, this is a pilot case, do not
reproduce without permission of the authors.

Copyright © SEKN, 2017.

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of its headcount. While 60% of Inditex’s sales came from Europe, Asia provided 25% of its revenues, and the
Americas only 15% (see Exhibit 3 for Inditex’s key financial data in 2016).
Inditex was born in 1963, when Amancio Ortega Gaona started Confecciones Goa, his first garment factory. Soon,
he felt drawn to retailing and opened the first Zara store, creating his first retail distribution and sale company.
From inception, Zara positioned itself as a store selling fashionable, average quality clothes at affordable prices.
By late 1970, Zara had grown into a six-store chain in Galicia. In 1985, Inditex SA was formally incorporated as a
holding company, and it initiated a path of rapid growth, opening its first store outside Spain (in Portugal) in 1988
and expanding to 18 other countries in the 1989-1998 period, by building or buying other fashion brands, such as
Pull and Bear or Massimo Dutti.
Throughout this process, Inditex experienced profound structural changes, turning from a production chain wholly
based in Spain in 1980 into a network of production centers and certified, audited suppliers across the Americas,
Africa, Europe, and Asia. This growth brought new challenges for Inditex, especially concerning labor, social, and
economic issues that involved its employees as well as its vendors and outsourced workshops.

Inditex’s Business Model

Over its 40-plus-year track record, Inditex had fine-tuned a unique business model. Self-proclaimed as a
“consumer-focused” company, it intended to offer affordable fashion with a premium shopping experience. To this
end, its brands’ stores became increasingly larger, with ever-improving design and very good lighting, located at
the best districts in the world’s largest cities. In recent years, some of its stores had started to open in iconic
buildings –true city landmarks. Inditex’s garment offerings featured significant design and meant to appeal to a
broad audience with prices below its competitors’. Inditex turned into one of the few industry players to update its
collection over 30 times a year, with stores receiving new garments twice a week.
Inditex’s store chains targeted consumer segments spanning several age groups and style preferences. Every
brand boasted creative and marketing freedom to set its own strategy, while the Group streamlined some central
processes, such as store acquisition or lease, funding, raw material purchases, supply chain management, and
sustainability policies.
Like all fashion companies, Inditex’s chains tried to sell their excess stock at the lowest possible prices during
sales periods. As Jorge Pérez, Massimo Dutti’s CEO, explained, “We sell 75% of our overall output during the
season, while the remaining 25% is sold on sale. If you factor in the 1% average waste, we end up with a 1.5-2%
excess inventory.” Managing this excess inventory played a significant role in the fashion business: “We have to
offer novel garments, and, when we have excess inventory, physical stores need to make room for new items, as
the space is very limited,” added Pérez.
In recent years, some Inditex chains, such as Massimo Dutti, Bershka, and Pull&Bear, had opened their own
outlets to sell excess inventory, but this store format had not proven popular at Inditex (see Exhibit 4 for every
chain’s inventory management scheme). As Massimo Dutti’s Ramón Rubio put it, “At Inditex, we don’t like the
outlet concept. Unlike of some of our competitors, who have strengthened their outlets, we have never really
bought into that format.” Margo Agnolin, Bershka’s CEO, added, “Ten years ago, we used to have seven or eight
outlets in Spain. (…) We have gradually done away with them because, at the end of the day, we find it quite hard
to link them with our core business.” Most at Inditex believed that the discount channel was not in line with the
premium shopping experience that its brands sought to offer customers. At outlets, garments were stacked in large
boxes, poorly showcased at rather unsophisticated stores. This channel also took up the time and effort of brands’
employees. As one of them noted, “We are not in the business of selling garments; we sell fashion.”

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The garments that did not end up at outlets were sold via online wholesalers –known as online discount stores–
at very low prices and in bulk (see Exhibit 5 for a description of new fashion retail channels). According to industry
experts, online channels enjoyed a number of advantages: unlike brick-and-mortar stores, their storage room was
limitless, and marginal costs were very low. Bershka’s Agnolin elaborated, “We cannot make returned garments
disappear, but we do try to get them out of the countries where we operate to avoid any trouble. Group leftovers
are sorted by geographical area and taken to Asia, Africa, and some areas in countries where we do not operate.”
To market leftovers in other markets, online discount sellers had to remove garment labels and agree to stay away
from the countries where Inditex operated.”

Inditex’s Social and Environmental Sustainability Policy

As it started listing at the Stock Exchange in 2001, the Group created its Social Responsibility Department. The
textile manufacturing industry’s fragmented structure (largely consisting of small and medium-sized companies)
and the socio-economic conditions of host countries (mostly developing nations) forced Inditex to roll out a robust
and comprehensive supply chain monitoring system as well as to build supplier clusters.
By 2016, over 100 employees worked at the four areas engulfed by Inditex’s (now renamed) Sustainability
Department, overseeing the production clusters located in Argentina, Bangladesh, Brazil, Cambodia, China,
Spain, India, Morocco, Pakistan, Portugal, Turkey, and Vietnam. Nonetheless, unlike other brands, Inditex
manufactured 60% of its output at nearby clusters –Portugal, Turkey and Morocco– to secure shorter lead times,
as garments featuring design and fashion traits proved highly time-sensitive. Inditex’s production chain consisted
of 1,725 vendors across 50 countries and connected to 6,298 factories. To guarantee that all items marketed by
Inditex met health and safety standards, R&D programs had been built with “suppliers’ suppliers” –i.e., the
chemical industry, which supplied the textile industry– to spot and replace any health or environmentally hazardous
chemicals. Finally, the Group’s Sustainability Department focused on reducing Inditex’s environmental footprint
across its entire chain: from factories to stores and in its products’ reverse logistics. Inditex expected to fully
introduce a closing-the-loop scheme by 2017.
Along with its supply chain work, Inditex had a long social investment track record. By 2016, it worked with 367
social organizations and had forged long-term strategic alliances with some of them, including Caritas,
Entreculturas, Doctors Without Borders (MSF), and Water.org. The Group viewed social investment from a
philanthropic standpoint, regardless of business considerations. In 2016 alone, its social investments –in excess
of €40 million– directly benefited 1.1 million people.
Inditex’s sustainability policy brought international accolades for both the Group and its leadership. In 2017, its
CEO, Pablo Isla, ranked first among the “Best-Performing CEOs in the World 2017,” a ranking published by the
renowned Harvard Business Review. Specifically, Isla rose to the top of this global list on account of his company’s
sustainability policy, as noted by the prestigious magazine itself:
Measured on financial returns alone, Isla comes in 18th in our ranking; his company’s performance on
environmental, social, and governance (ESG) factors, which count for 20% of a leader’s score, propelled
him to the top spot. ESG-rating firms praise Inditex’s transparency in managing, monitoring, and auditing
its supply chain. The company encourages consumers to bring worn-out clothing to its stores for recycling
(in Spain it runs an at-home-pickup recycling program), and the Join Life brand of Zara, its largest chain,
is produced using recycled fibers and with careful attention to the consumption of water and other
resources.2

2 Daniel McGinn, "The Best-Performing CEOs in the World 2017," Harvard Business Review, Nov-Dec 2017, p. 3. An online

version of this article was available on 10/24/17 at https://hbr.org/2017/11/the-best-performing-ceos-in-the-world-2017.

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Launching a Social Franchise

In 2001, Valentí Agustí, Palafolls’ Mayor, and Jorge Pérez, Massimo Dutti’s CEO, met to explore ways to
collaborate on social programs. A physician, Mayor Valentí also chaired the Comunidad Terapéutica del Maresme
(“Maresme’s Therapeutic Community”), an organization that helped mentally-challenged individuals at Maresme,
a coastline county near Barcelona. Passionate about his work, Valentí convinced Pérez of the therapeutic benefits
that working as shop assistants would bring to mentally-challenged people. While some local civil society
organizations worked on providing labor inclusion solutions for this population segment, their ability to offer jobs
proved limited, and few retail companies seemed interested in hiring these individuals. They would largely work
on simple, labor-intensive jobs, such as gardening. Valentí and Pérez realized that coming up with a business
venture that would assign more sophisticated tasks to these people could yield a significant impact.
Soon, a leader from a labor inclusion social organization, Miquel Isanta, who managed a private foundation called
Molí d’en Puigvert (henceforth, “Moli Foundation”) joined these meetings. Isanta and Valentí managed to sell the
idea to Pérez, who recalled,
Miquel came to us with an entirely different project. He suggested a collaboration to replicate the For&From
scheme in several locations to sell leftovers via a channel that would undermine neither our brand nor our
store alignment, while promoting labor inclusion for people with working disabilities and invigorating local
market dynamics. At first, I told him, ‘I don’t know that I’m going to be able to support that venture over
time, so, honestly, I’d rather not start it.’ But, then, the conversation shifted towards the notion of building
a social store that we could supply with our products –both leftovers and samples. It would be located at
Manresa and work with handicapped people. Then, it made sense to us: this social project was a good fit
for us, and, from an organizational standpoint, we knew we could merge it into our business, so that it
would last.
To delve deeper into the project in order to establish its feasibility, Pérez asked Ramon Rubio, Massimo Dutti’s
CFO, to look into it. The Moli Foundation had become the home to rehab programs for people with Severe Mental
Disorders (SMDs) in Maresme County. In subsequent talks, the project started to take shape: the store chain
would be managed by the social organization, manned by mentally-challenged people, and would market Massimo
Dutti’s excess inventory. Every store would need to prove profitable on its own, and every social venture would
have to ensure its success. Inditex’s companies would not engage in philanthropy; rather, they would forge a
business relationship with their mission-critical partner in a hybrid chain, after making an up-front investment.
The first store opened at Palafolls (see Exhibit 6 for a map showing the locations of For&From stores) on April
29, 2002. With some 753 square feet (70 square meters), the small store followed Massimo Dutti’s design
guidelines. Managed by a supervisor with sales experience, it employed two people with SMDs and had four
patients doing internships. It proved a success for the Moli Foundation, with daily sales of €527 and annual
revenues of €226,000 in its first year (see Exhibit 7 for For&From’s store sales in 2014-2016).
While the first store effectively laid the groundwork for the project, it took five years to open For&From’s second
store. According to an insider, “At the time, the efforts of Inditex’s Social Responsibility Department focused on
preventing any surprises along a complex supply chain than spanned around the world.” The role of social
initiatives still had to mature inside the Group. Social Responsibility Department officials interacted with brands’
purchasing managers on a daily basis, but their exchanges revolved around upstream –supply– issues. The CSR
team seldom contacted store employees. Over time, a robust supply chain management system consolidated,
addressing all risk factors (workshop workers’ social and labor conditions, industrial safety, product safety,
environmental care, etc.). By 2007, Inditex started to focus largely on extending a positive social impact along its
entire value chain, and social considerations trickled downstream, reaching brands and consumers. As Jesús
Echeverría, Inditex’s Chief Communications and Institutional Relations Officer, remarked, “We exercised some
caution with For&From at first, because it put our brands –our key asset– on the line. However, For&From’s positive

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outcomes encouraged us to continue growing.” Thus, the Group started to work on expanding the successful
project started five years before (see Exhibit 8 for a timeline with For&From’s milestones).

Consolidating For&From’s Scheme

Time helped to consolidate and fine-tune For&From’s business model. In recent years, new store openings had
doubled sales from €3.6 million to over €7 million. The concept was quite straightforward: a store chain managed
via alliances with strategic civil society partners. The stores were meant for “special” customers and run by
“special” people –hence, its name “for & from”– with this attribute made visible to consumers by means of a social
brand that would join Inditex’s fashion brands (see a photo of a Massimo Dutti/For&From store at Palafolls,
Barcelona, in Exhibit 9). To render this concept viable, it would prove necessary to find a mission-driven
organization that could understand how the market might be leveraged to support its social (rehab) mission.
Bershka’s Marco Agnolin described this partner in the following terms: “Moltacte has an amazing business
approach. They’ve told us, ‘Look, this is not patronizing handicapped people; this is managing a business.’ As a
result, they have kept their stores profitable, and they tend to become increasingly profitable.”
Table 1: For&From’s Sales, 2012-2016

2016 2015 2014 2013 2012

Sales €7,091,581 €5,322,380 €4,066,085 €3,648,000 €3,647,189

Overall, NGO partners tried to draw away from the paternalistic culture and, thus, were demanding with rehab
beneficiaries. Rather than just keeping them busy or entertained, this venture intended to train these people so
that they could transition into other jobs and become self-sufficient. As Cogami’s Mayte Gutiérrez explained,
This project aims at providing a transition for people, making them more professional and able to join the
labor market. (…) We employ 14 people who have become better professionals during their time at this
organization, both because we have adopted a more demanding stance and because we are supported
by a highly professional business organization. Then, our people have learned from all the individuals sent
by Inditex to dress shop windows and so on and so forth.
To this end, a two-prong approach was used, with assistance professionals closely supporting beneficiaries (see
next section) and a strict monitoring of their job performance. As María Vizcaíno, from the same organization,
added,
For our beneficiaries, we no longer want marginal jobs –those no one else wants to do. We are demanding
with our workers. (…) They are expected to do everything they have to do with the same performance
quality of any other worker. When that is not the case, we assign them to other kinds of tasks, or we fire
them. This is clearly established: we are careful; we don’t fire people just because, but it is truly important
for us now to shape our internal culture, so that people don’t feel that just because they have a certified
disability, they can do whatever they want. From the standpoint of this project’s purpose, we have
accomplished our goal.
For brands’ management teams, partners made a unique contribution. As Stradivarius’ Mireia Gimeno noted,
At one point, we chose to say, ‘we don’t know enough about this.’ We know our business, is there anyone
who knows about social issues? The assistance side of this project, which is the one I can’t handle, marks
the difference between For&From and a regular business franchise. (…) Moltacte –my NGO partner–
manages a team that I wouldn’t know how to manage. I can contribute my knowledge on how other stores

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are set up, so that they have a similar store, and they contribute a different skillset. (…) We have worked
with our partner to ensure that the store runs smoothly as an organization, to make it financially viable,
which underpins the other purpose of this project –rendering it sustainable over time.
Unlike Inditex’s many other social and environmental programs, this was a business venture that leveraged its
retail chains’ strategic assets –brands, products, stores, distribution chain. As a result, inside and outside
communication efforts were required to join two realms that had remained separate at Inditex until then. “Don’t we
work on social issues with our donations?,” some inside the company wondered. This initiative was different. “It
is a venture,” elaborated Echevarría, Chief Communications Officer, “because it leverages our business chain,
enabling us to reach more people, to have a greater impact.” Yet, this was different kind of venture. It was a social
venture that “did not pursue financial gain but social impact. We are trying to create jobs –quality jobs– for
vulnerable groups,” added Echevarría.
This idea appealed to Inditex –most particularly, to its Sustainability Department–, but it would not take off without
the buy-in of the Group’s business units, which were autonomous in setting their strategies. Brands reacted in a
positive way, probably because this project fitted in with their business operations. As Jordi Triquell, Stradivarius’
CEO, explained,
For me, it mattered that it was a long-term project, as some companies’ social engagements sometimes
fall apart in four days. (…) It has to work out for all of us; otherwise, after a year, the teams in my chain
find it hard to think about it. In order for my teams to commit, this must be seen as something “normal”, it
has to be just another business. They all need to get something out of it. Selling more garments, using it
as a regular distribution channel –it all helps. It must operate like any other store, and, in fact, it does.
They are happy with their outcomes, and so are we.
Mireia Gimeno, H.R. Head at the same chain, underscored this view, “At Human Resources, we regard the
For&From store and the support we can give them in the same way we view our support to any other franchisee.
For Inés (from the Marketing area and store supervisor), it is just another store that she has to call on, although
the visit is a little different. Then, for me, the key lies in the fact that, inside the company and from a management
standpoint, For&From operates like any other Stradivarius store or franchisee.”
At the same time, as this was a social venture, its success metrics were not defined on financial terms but on
impact. From an economic and business outlook, the venture had a no-loss goal: preventing social value creation
to come at a financial cost, in order to ensure its sustainability over time. As Stradivarius’ Jordi Triquell pointed
out, “From a business standpoint, we don’t want to make money with For&From; we just need to ensure that we
do not lose more than we normally do with excess inventory.” This helped to make the case for this initiative to
stockholders, and to avoid any concerns when the time came to expand its scale. And it worked: stores sold
garments at considerable discounts (see next section), but these discounts did not exceed those typically granted
to leftover online wholesalers.
Excess inventory management practices did not intend to make a profit for brands but to reduce their losses as
much as possible, freeing up capital for new collections. Stradivarius’ Mireia Gimeno explained, “We sell garments
to Moltacte (our social franchisee) at the same price that we would sell them to a retail outlet franchisee –that is,
with a discount. Then, our social franchisee sets a price and works like any other franchisee.” Thus, the social
venture generated no opportunity costs, making the venture justifiable to stockholders and enabling future
expansion plans.
Additionally, this social venture advanced a relevant business goal. As Oysho’s Miguel Vidal noted, “In addition to
serving a social purpose, we perform a task that we need to do as a retail chain: having a controlled outlet for our
excess inventory.” To the extent that this venture satisfied a store’s need, its potential for growth proved
substantial. “While this excess inventory may not amount to a significant share for us, with Inditex chains’ natural
growth pace, it will become increasingly larger,” Vidal concluded.

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As a result, the concept appealed to brands, which typically tended to frown upon discount outlets. “I don’t like
leftover outlets, but undertaking a social project did seem attractive. (…) Discount stores tarnish brands’ image,
but, instead of shutting them down, we turned them into a socially valuable operation that enhances our brand,”
stated Jordi Triquell, Stradivarius’ CEO. Massimo Dutti’s Pérez added.
Historically, Inditex’s brands had enjoyed ample leeway to make their own strategic and operating decisions. When
the first For&From store opened in 2002, other Group brands chose to join the venture, including Stradivarius,
Bershka, Oysho, and Pull&Bear. By 2017, however, Massimo Dutti, with its four For&From stores, remained at the
forefront of this social franchise scheme.

A Co-Branding Chain: Massimo Dutti For&From

For those involved in this project, Massimo Dutti’s store at Igualada (see photo below) clearly illustrated the notion
underlying For&From. The goal had been to build these stores at non-traditional locations, far from large urban
centers. As Massimo Dutti’s Ramón Rubio explained, “What we have done appeals to me the most because these
are small towns… really small towns, which benefit greatly from some additional business.” Housed in an iconic
Catalan modernist building, this posh, comfortable store offered the premium shopping experience associated with
the brand.
Unlike what characterized traditional discount outlets, garments were not piled up on boxes. Store shop windows
displayed fashion collections, like the ones at regular
stores, albeit from the year before. “Supervisors are
constantly teaching employees how to fold garments:
‘This season, we’re placing sleeves this way to make
them look nicer,’ or “Belts should be showcased like
this,’” said the store manager. Customers were not
forced to buy “whatever was on display,” rather, they
had choices. “We try to make sure stores have a little
of everything so that they can offer assortment to their
customers… We consistently heed customers’
requirements and strive to get them what they want. If
we don’t find something somewhere, we get it
somewhere else. If we didn’t manage stores that way,
they wouldn’t sell as much as they do,” she continued.
Store workers’ special profile was neither advertised
nor hidden. As noted by Miguel Ángel Ruiz, Puigvert
Moli Foundation’s Director, until recently, shoppers
walking into the stores did not know this, “but, now, as
For&From’s brand has gained awareness, most customers know that the people working there have some sort of
handicap. (…) I think this adds value to the store. My intuition tells me that shoppers don’t come to the store for
that reason –they shop there because the store sells Massimo Dutti’s garments at reasonable prices– but many
like the fact that handicapped people work there.” Yet, the store intended to offer a customer-centered experience
–and not an experience focusing on rehabilitating individuals. As a result, while For&From’s social brand gained
notoriety, some customers still noticed no remarkable difference between Massimo Dutti’s retail stores and its
social franchises. As the store manager pointed out, “Occasionally, the supervisor or the monitoring professionals
have to apologize to customers because they have to wait a bit longer for something they have required or they
have been asked the same question three times, and they don’t understand what’s going on… but that seldom
happens.”

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Making a “normal” shopping experience possible called for a hybrid operating scheme, with business associates
and social workers working side by side. As the store manager elaborated,
These people get support at the store. There are five beneficiaries and five assistants, provided by the
NGO, experienced and trained in therapeutic assistance. (…) That’s the contribution from Miquel and his
team: they manage that part of the scheme, recruiting and training monitoring assistants. We are not
involved in that process. It has unfolded in a very natural way: the teams from Moltacte or Molí are
experienced in handling people with severe mental disorders, and they manage their work very nicely.
Working with this particular group of people proved challenging. “Schizophrenics account for 70% of them, and
some suffer from personality disorders, while others have been diagnosed with bipolar and other disorders,” Ruiz
explained. Store settings also challenged rehabilitating individuals, but guidelines were adjusted to their traits. “If
it takes them three minutes to fold a shirt, then that’s the time it takes, period –we don’t stress over it,” the store
manager chimed in. The ultimate goal was to prepare these individuals for a successful transition into the job
market. “Most of our beneficiaries stay here for three years tops,” she noted. “This is a pre-job service, with
beneficiaries receiving support from the venture. This is not an employment relationship; they are not working –
they are learning, acquiring job skills and trade practices that they can later use here or somewhere else.”
For beneficiaries’ experience to prove educational and rewarding, Molí Foundation rotated them among different
jobs. “An individual who remains at the storage room becomes overwhelmed, and we need to rotate these
employees, because they also like selling. If they stay at the storage room too long, they start feeling lousy, and,
eventually, they just lose it,” elaborated the store manager.

However, in addition to this social side, the store featured a top-tier business management in order to secure the
same performance as other stores. The key liaison between the store and the retail chain was the store manager,
who interacted with Massimo Dutti’s marketing manager. “The product manager tends to her needs: ‘I need more
garments, more pajamas, more bathing suits. I’d like to lower prices a bit to raise turnover. You’ve sent too many
of these garments,’ etc.,” explained Massimo Dutti’s Ramon Rubio. He added, “Our regional head in Catalonia
visits stores –we call it “store management.” She calls on stores twice every season, and, along with the therapist
and the store manager, they take a hard look at coordination issues and product display at the store.”
The chain’s role hinged on advising stores to facilitate their business success, but it granted them autonomy to
make decisions. “We offer some marketing advice –‘Let’s see how this works for you’–, and they go, ‘We can do
this much, but not much more, because our people become psychologically overwhelmed.’” Overall, social
franchises also enjoyed ample leeway. Ramón Rubio stated,
We don’t meddle much in their operations. We don’t assess their personnel; we don’t ask store managers
to do this or that; they handle everything. We are happy, and we haven’t experienced any incidents thus
far, really. (…) Our General Services Department provides them with bags, signs, photos, branding and
marketing materials; at stores, the image and décor are all ours.
Chains’ key contribution involved logistics and supplies. Indeed, For&From stores were managed with the same
professionalism and efficiency as all other stores. Molí Foundation’s Ruíz remarked, “This is the way they operate
all their stores; the control focuses on the storage room –that is, at the heart of logistics. They know exactly what
they have delivered, what we have sold, what we have left, and they keep sending products over.”

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Looking Ahead
By early 2017, Inditex’s social franchise scheme had consolidated inside the organization, and Piñeiro pondered
how to take it to the next level. A more fluent relationship between For&From stores and brands’ staff remained a
pending goal. Piñeiro firmly believed that this social franchise provided a great opportunity for corporate volunteer
work and sponsorship. He had witnessed how enthused stores’ personnel felt about having “special sister stores”
to work with. Some viewed the United States’ Magnet School system as a valid model, 3 with high-performing
schools mentoring neighboring schools with a lower performance.
Inditex’s successful social franchise also sparked civil society partners’ enthusiasm. An average store could
provide a net annual income of some €60,000, which would prove very useful to support other mission-related
endeavors. Also, the scheme’s growth potential seemed to hold the promise of a significant impact in Spain. While
the national unemployment rate stood at 19.6% in July 2016, unemployment among handicapped people neared
32%. Three out of every four working-age individuals with some disability felt that they had or would have job
constraints. The employment rate for Spain’s mentally-challenged population segment –some 279,400 people
between the ages of 16 and 64 in 2013– barely reached 15.7%.4
Hence, Piñeiro was challenged to meet his partners’ growth expectations. As Cogami’s Mayte Gutiérrez put in,
“We clearly see the need to grow, but not just to make money but to raise awareness on projects like this, which
prove vital for us –I mean, these financial and social value projects are the path we want to take.” When asked
how far they wanted to go, she replied, “While we say, ‘We’ve got ten stores,’ we’re going to try to make it to 50
over the next ten years. We’re shooting for a five-fold growth, and we’ll figure out how to do that. We need to set
ambitious goals, so that the company understands that this is a shared-value scheme between social organizations
and a business company.”
Growing the initiative by a factor of five would not prove easy. For starters, skeptics inside the company would
have to be won over. Unlike other projects, this social franchise involved Inditex’s core asset –its brands. On the
one hand, For&From offered an opportunity to link brands to some of Inditex’s bedrock values. As Echavarría,
Chief Communications Officer, noted, “For&From instantly conveys values that stand as Inditex’s cornerstones:
solidarity, team work, sustainability.” On the other hand, it seemed less complicated and risky to make donations
to social organizations, instead of engaging them in the Group’s value chain. Piñeiro thought that the way to make
the case for the social franchise in order to secure skeptics’ buy-in would need to zero in on its investment’s net
present value and potential returns. He had read about a metric known as SROI (social return on investment),
increasingly used by impact investors, but he did not really know how to use it (see Exhibit 11 for more on SROI).
Based on his experience, Inditex looked kindly upon projects with return rates nearing or exceeding 20%, while
any endeavor with a lower return rate would require a very strong justification and would prove hard to scale up.
He believed that social investments’ long-term sustainability could help to persuade company executives (see
Exhibit 12 for financial data on For&From). While researching this issue, Piñeiro had found that the European
Union recommended a 4% rate to estimate future discounted cash flows.5
Another challenge for the expansion of Inditex’s social franchise lay in the availability of excess inventory. As
Massimo Dutti’s Ramón Rubio pointed out, “we actually work to reduce excess inventory as much as possible, so
that, after our sales, we end up with few leftovers. This is the polar opposite of what you would need for the social
venture to grow.” For&From’s business model depended on collection building, which, in turn, required excess

3 https://en.wikipedia.org/wiki/Magnet_school.
4 Alfred Vernis and Sophie Robin (2016), “Empleo con Impacto Social: el Caso de Momentum Project,” Instituto de
Innovación Social, ESADE.
5 Better Regulation Toolbox, European Commission, available at http://ec.europa.eu/smart-regulation/guidelines/docs/br_

toolbox_en.pdf, accessed on October 20, 2017.

9
 For&From: Inditex Group’s Social Franchise

inventory across all categories. “If we have 5,000 yellow shirts left, we cannot build a collection solely with yellow
shirts,” explained Jordi Triquell, Stradivarius’ CEO.
To remedy a hypothetical leftover assortment bottleneck, some thought of turning For&From into a sort of multi-
brand store chain, bringing several Inditex retail chains together. This would challenge Inditex’s culture, whereby
brands had consistently enjoyed significant independence, even competing against one another to capture some
consumer segments. Some NGO partners took the notion even farther, considering opening their stores up to
competitors. “At our stores in Catalonia, we are realizing that, in order for the model to work, stores need a vast
product assortment. (…) Based on the success we’ve had with these three stores, we are looking into expanding
the project a bit, letting other brands in to create a benchmark shopping mall around the social outlet concept,”
Cogami’s Gutiérrez summed up. The notion of a “social outlet” shopping mall strayed somewhat from the customer
experience Inditex’s chains wanted to associate with their brands and would call for significant analysis and
negotiation inside the Group.
Finally, Piñeiro dreamt about internationalizing this social franchise. Many still remembered when Inditex dared to
take its Zara stores across Spanish borders. He wondered if For&From’s scheme was mature enough for
international expansion into other markets. However, he pondered what attributes would prove key to implant this
model successfully in new environments. He thought it would prove more sensible to consider a market with
significance for Inditex, where it would make sense to invest to boost goodwill for its brands. Also, this scheme
required leftover critical mass, as chains usually shipped excess inventory back to Spain at seasons’ end. The
sole exception to this rule of thumb were the markets with such a large volume that it made no business sense to
return leftovers. Specifically, Inditex’s rapid expansion in the Americas (accounting for 15.3% of overall sales by
2016) and Asia (23.9% of sales in 2016) increased excess inventory in those areas. Some countries already
boasted a substantial number of Inditex stores (see Exhibit 10 for the number of stores across continents). Piñeiro
envisioned the creation of the first multinational social store chain as a significant milestone for Inditex and his own
career. Had the time come to take that leap?

10
 For&From: Inditex Group’s Social Franchise

Exhibit 1 Inditex’s Major Markets

Source: Company documents.

Exhibit 2 Inditex’s Eight Brands

Source: Company documents.

11
 For&From: Inditex Group’s Social Franchise

Exhibit 3 Inditex’s Key Metrics, 2016

2016 2015

Sales 23,311 20,900

Gross margin 13,279 12,089

EBITDA 5,083 4,699

EBIT 4,021 3,677

Net income 3,157 2,875

Number of stores 7,292 7,013

Store openings 279 330

Number of markets 93 88

Headcount 162,450 152,854

Source: Company documents.

Exhibit 4 Chains Excess Inventory Management Scheme

Source: Company documents.

12
 For&From: Inditex Group’s Social Franchise

Exhibit 5 New Fashion Retail Channels

dot.coms: In recent years,

online retailing has
experienced great growth,
exceeding all expectations.
Zara and the other Inditex
chains have developed their
websites. Inditex brands have
extensive online presence,
and some of them have their
own apps. This screenshot
shows Oysho’s website.

Online Outlets. The growth of

online outlets, like Privalia
(screenshot on the right,
number one in Spain) and
others that focus on selling
off-season fashion leftovers at
substantial discounts, has
proven significant. Large
brands rely on this channel to
swiftly and cost-effectively get
rid of their excess inventory
without jeopardizing their
image. However, there is a
zero-sum relation between
this channel and For&From
that renders them
incompatible.

13
 For&From: Inditex Group’s Social Franchise

Exhibit 6: Fo&From stores location

Exhibit /: For&From Stores’ Sales, 2014-2016

Store Partner Sales in 2016 Income in Sales in 2015 Income in Sales in 2014
NGO 2016 2015

Dutti For&From (Palafolls) FPMP €1,507,791 €232,071 €874,724 €189,615 €868,945

Bershka For&From (Palafolls) FPMP €461,843 €40,628 €447,940 €35,342 €437,580

Oysho For&From (Palafolls) FPMP €294,223 €10,822 €284,727 €2,569 €235,508

Tempe For&From (Allariz) Cogami €156,876 €124,086 €135,541 €21,280 €123,406

Dutti For&From (Allariz) Cogami €753,922 = €687,826 = €705,158

Tempe For&From (Culleredo) Cogami €655,660 -€63,560 €402,847 €24,949 -

Pull&Bear For&From (El Ferrol) Cogami €150,841 - - - -

Stradivarius For&From (Manresa) Moltacte €744,397 €98,022 €909,594 €88,482 €840,921

Massimo Dutti For&From (Llagostera) Moltacte €1,030,751 €158,736 €983,317 €117,998 €337,551

Massimo Dutti For&From (Igualada) Moltacte €772,583 €118,190 - - -

Tempe For&From (Elche) Apsa €562,694 €13,285 €595,864 -€7,625 €517,016

TOTAL €7,091,581 €732,280 €5,322,380 €472,610 €4,066,085

14
 For&From: Inditex Group’s Social Franchise

Exhibit 8 For&From’s Milestones

Source: Company documents.

15
 For&From: Inditex Group’s Social Franchise

Exhibit 9 Massimo Dutti / For&From Store at Palafolls (Barcelona)

Source: Company documents.

16
 For&From: Inditex Group’s Social Franchise

Exhibit 10 Number of Stores Outside Spain of Inditex Brands with F&F Operations

The Americas

Market Pull&Bear Massimo Dutti Bershka Stradivarius Oysho

Argentina 0 0 0 0 0

Aruba 0 0 0 0 0

Brazil 0 0 0 0 0

Canada 0 8 0 0 0

Chile 0 0 0 0 0

Colombia 5 5 11 11 3

Costa Rica 2 1 2 2 0

Ecuador 2 1 2 2 1

El Salvador 2 0 2 1 0

United States 0 3 0 0 0

Guatemala 3 1 3 3 2

Honduras 2 1 2 2 0

México 61 37 64 36 46

Nicaragua 1 0 1 1 0

Panamá 2 1 2 2 2

Paraguay 0 0 0 0 0

Peru 0 0 0 0 0

Puerto Rico 0 0 0 0 0

Dominican Republic 1 2 2 2 2

Uruguay 0 0 0 0 0

Venezuela 5 0 10 0 0

Asia

17
 For&From: Inditex Group’s Social Franchise

Market Pull&Bear Massimo Dutti Bershka Stradivarius Oysho

Market Pull&Bear Massimo Dutti Bershka Stradivarius Oysho

Saudi Arabia 15 14 31 44 18

Armenia 2 2 2 2 1

Austria 3 3 8 0 0

Azerbaijan 2 2 3 2 1

Bahrain 2 2 1 1 1

China 81 79 84 74 73

South Korea 5 8 6 3 2

United Arab Emirates 8 11 9 6 8

Philippines 2 2 4 3 0

Georgia 1 3 2 2 1

India 0 2 0 0 0

Indonesia 11 4 7 12 1

Israel 25 2 10 3 0

Japan 0 0 24 11 0

Jordan 3 3 2 5 2

Kazakhstan 4 3 4 5 2

Kuwait 3 2 2 2 4

Lebanon 5 6 8 5 5

Malaysia 2 5 4 0 0

Oman 0 0 1 1 1

Qatar 3 3 3 1 3

Russia 89 52 98 86 67

Singapore 3 4 3 1 0

Thailand 3 4 1 2 0

18
 For&From: Inditex Group’s Social Franchise

Market Pull&Bear Massimo Dutti Bershka Stradivarius Oysho

Taiwan 3 5 1 0 0

Turkey 28 22 30 28 25

Vietnam 0 0 0 0 0

Source: Company documents.

19

Exhibit 11: Interview with Charles Castro, ECODES Researcher Who Measured F&F’s SROI
1. Where does the SROI (Social Return on
Investment) metric come from?
The SROI metric was created in the mid-1990s by
REDF, a U.S.-based philanthropic fund that makes
investments in social enterprises offering job
opportunities for people at social exclusion risk.
REDF needed methods and metrics to measure
the social value created by their portfolio
companies, just as business companies measure
their economic and financial performance. Then,
REDF came up with a method for in-company use,
based on a cost-income analysis and introducing
the engagement of relevant stakeholders in the
process. As a result, the SROI method combines
qualitative and quantitative techniques to provide
greater depth and background to outcomes. In
2000, driven by the United Kingdom’s
government, the renowned think tank New
Economics Foundation revised this methodology
to use it in the public and nonprofit sector.
2. How did you become involved with
For&From?
I am the lead researcher who measured
For&From’s social impact at Inditex’s request.
Since 2011, ECODES, the organization where I
work, has been working to promote the use of
20
For&From: Inditex Group’s Social Franchise
social impact metrics in Spain, particularly the
SROI. We have conducted over 25 SROI
measuring studies at several social enterprises,
public agencies, and nonprofits. Specifically, our
expertise focuses on social impact measurements
at companies and initiatives with a focus on social
and labor inclusion for handicapped people. As
such, Inditex asked us to identify and quantify
For&From’s social return, making it visible.
3. Looking at financial data, the quantification
of qualitative, subjective and perception-based
dimensions seems striking. How was that
done? Could you please explain how the
“Monetary Value of Wellbeing and Living
Condition Improvements” was calculated?
The SROI approach hinges on the monetary
expression of social benefits. Yet, this goes
beyond monetary or financial flows; the aim is to
estimate the value of a project’s results for its
beneficiaries and society. Many of these benefits
are intangible in nature and/or highly subjective,
but that does not prevent measuring them, as
long as the change driven by the project can be
proven by means of an instrument validated to
measure the metric. Measuring For&From
beneficiaries’ wellbeing and living condition
improvements illustrates this quite effectively. This

metric was not chosen on a whim: it came as a
result of qualitative consultations (in-depth
interviews, focus groups, workshops, etc.). Fifteen
group interviews with handicapped employees
and their families were conducted, in addition to
five workshops with social organizations’ support
professionals and over ten interviews with other
experts on the field. This qualitative field work
enabled us to map the project’s impact, showing
the actions carried out and the results for the
stakeholders identified as key for our analysis –
the ones experiencing the most significant effects
of the project. Once the impact was mapped, we
had a list of priority metrics that would be
measured during the quantitative field work
stage.
Measuring wellbeing and living condition
improvements was probably the most
complicated part of this analysis, as it involves an
extremely complex notion that encompasses
multiple dimensions. Thus, we divided it into four
dimensions (emotional wellbeing, satisfaction with
life, self-esteem, and positive behavior), based on
the information we had gathered at the meetings
with project beneficiaries and their relatives. For
theoretical guidance throughout these probes, we
6 http://www.nef-consulting.co.uk/a-dynamic-model-of-well-
being/.
7
The European Social Survey (ESS) is a social scientific
endeavor to map the attitudes, beliefs and behavior patterns
of the various populations in Europe. The first ESS was
21
For&From: Inditex Group’s Social Franchise
relied on the wellbeing model developed by the
New Economics Foundation. 6 To quantify the
improvements experienced by For&From store
employees, we incorporated a number of
questions (indicators) to the questionnaire used
with project beneficiaries to measure their
perceptions on the effect of their employment at
For&From stores on these four dimensions of
their wellbeing and living conditions. The
questions used were drawn from the European
Social Survey (ESS),7 which collects information on
Europeans’ perceptions on their living conditions,
wellbeing and health, and which has been tested
with methodological rigor to ensure question
validity and reliability. To gather information and
quantitative data on the nature, intensity and
magnitude of project benefits for handicapped
employees’ wellbeing and living conditions, we
sent a questionnaire to handicapped employees
currently working at a For&From store. Sixty
(N=60) handicapped workers completed the
questionnaire correctly, providing a statistically
significant sample of the group of employees
currently participating in this project.
However, these data only helped us to determine
the current status (post-employment) of these
conducted in 2002, and, since then, it is carried out every
two years. ESS employs rigorous methodologies to
guarantee that the data collected across participating
countries prove comparable. http://www.upf.edu/ess/.

metrics for employees. To move forward in impact
measurement, it was necessary to establish a base
line to measure these aspects if these individuals
had not participated in this project. The impact
assessment and measurement terminology calls
this counterfactual. To this end, we used a pre-
post single group study design. This design type
is based on measuring and comparing results
before and after a subject is exposed to an
intervention. Single group pre-post designs do
not include a comparison group; rather, every
individual serves as her own control subject. In
this case, we asked handicapped employees to
look back and answer the same questions
remembering their life before they started to work
at the For&From store. While this use of estimates
to approach pre-event results is not the most
common, we felt at ease with it, given how
relatively easy it was to identify and isolate these
people’s living conditions before and after their
employment. 8 The different results from both
periods –before and after starting to work at the
For&From store– can be attributed to project
effects, with some adjustments to factor in how
employees themselves attribute these changes to
the project.
8 It should be noted that this methodology has a long-
standing record in the literature on impact studies. For
instance, the New Economics Foundation (NEF), pioneers
in the use of SROI, employed a similar method for an
impact study on a community healthcare project in Kenya.
22
For&From: Inditex Group’s Social Franchise
To assign a monetary value to wellbeing and
living condition improvements, we relied on a
review of academic literature on the economic
valuation of the quality of life –specifically, the
“European Value of a Quality Adjusted Life Year”
study, an analysis carried out in Europe to assign
a monetary value to a quality adjusted life year
(QALY).
4. Other striking variables in your financial
analysis are not subjective, but counterfactual:
they measure something “not spent” (such as
“Hospital Expense Savings). How can you
measure something that never actually
happened?
The notion of counterfactual statements is very
important when using the SROI methodology.
Employing several techniques, we try to establish
what would have happened as regards impact
metrics if the intervention under study had not
taken place. The idea is not to measure what
happened, but to estimate the change that would
unfold without the intervention under study. The
purpose of this is to discriminate effects caused
by the intervention from those produced by other
factors (such as natural evolution and other
Filling the gaps: A Social Return on Investment Analysis
(2013)
https://www.christianaid.org.uk/images/Filling-the-gaps-
social-ROI-analysis-May-2013.pdf

variables). It shows what would have happened
without the effects of the intervention. In the case
of hospital expense savings, we were able to
establish a decrease in hospital admissions
among employees suffering from severe mental
disorders after they started working at For&From
stores. Based on data on average hospital
admission costs at the public healthcare system,
we managed to estimate the value of this
improvement. Nonetheless, it should be noted
that this process intends to estimate the value of
a specific impact (in this case, mental health
improvements among employees with severe
mental disorders), not economic flows. In this
example, these savings may not materialize
completely, as part of these costs are fixed and
do not reflect the marginal costs of hospital
admissions. However, we believe that it is the best
available proxy for this impact, and we used it to
translate the project’s positive social externalities
into monetary terms.
5. What does the “New Jeb Opportunities”
variable measure? It does not refer to hiring,
because that is measured somewhere else,
and this benefit is not captured by
handicapped employees but their families.
How did you come up with this metric? Why
did it seem important to you, and how did
you measure it?
23
For&From: Inditex Group’s Social Franchise
We must make a distinction between the
monetary flows provided or facilitated by the
project and the attempts to translate For&From’s
social externalities into monetary terms. In this
case, we measured an impact on handicapped
employees’ families. Remember that the SROI
methodology seeks to identify and quantify the
social externalities of a project or organization for
ALL its relevant stakeholders –not just its direct
beneficiaries. A very tangible project benefit
revealed by the qualitative field work involved the
new opportunities emerging for some
handicapped employees’ relatives, as they were
able to rejoin or stay in the labor market once
their need to support and care for their
handicapped relative decreased. To measure this
impact, we drew from the findings of our survey
for project employees’ families, which indicated
that, for 17% of the families surveyed, the fact that
their handicapped relative worked at a For&From
store made it possible for other family members
to focus on their paid jobs (instead of devoting
themselves to support and/or care tasks). As in
other instances, we considered the counterfactual
scenario, assuming that these people would not
actively participate in the labor market if they had
to devote more time to support and care for their
relative.

To assign a monetary value to this impact, we
used Spain’s average salary for women as a proxy
(for both full- and part-time female workers). We
chose a conservative approach, taking into
account working women’s average wages, to
calculate this impact because we believe that, in
24
For&From: Inditex Group’s Social Franchise
most families, women are typically the lead
caregivers for relatives with mental disorders and
the ones who enjoy a greater opportunity to join
the labor market when their care and support
duties are significantly reduced.