Monday, December 1, 2008

Nonprofit Unrelated Business on the Rise?

Conventional wisdom suggests that when donations dry up, nonprofits start opening Macaroni factories and other unrelated businesses.  A story in this week's Nonprofit Times seems to confirm conventional wisdom.  The article reports that a Massachusettes based nonprofit, CMARC, recently purchased an advertising direct mail franchise and intends to start offering direct mail options to local business.

CMARC bought the franchise from Garden Grove, Calif.-based direct marketing firm Money Mailer. CMARC plans to turn one of the staff community contact people into a sales person who aids businesses with direct mail options.  The range of business franchises that nonprofits operate seems to be getting wider -- from the well-known Ben & Jerry's ice cream Partner Shops to nonprofits installing wheelchair ramps and delivering candy baskets. CMARC's deal will probably break even this year and managers hope it will bring in between $200,000 and $300,000 annually within five years Ð roughly one-third of the organization's current $9-million annual budget. CMARC serves more than 300 disabled people a day with vocational programs. Money Mailer deals with nearly 300 franchise locations nationwide. "Money is tight. We haven't received a cost of living increase in Massachusetts in 19 years," said Sheri McCann, CEO and president of CMARC. "We work with fundraising and are really having a difficult time meeting our needs, so we're looking for other options."

Here is the interesting kicker.  One of CMARC's charitable purposes is to provide job opportunities for disabled citizens (as part of a larger goal of allowing disabled persons to live independently).  Does operating a plain old business in furtherance of the job provision (as opposed to job training) charitable purpose take this out of the unrelated realm?  I recall some case law on the point but don't remember it right off hand. 

dkj

http://lawprofessors.typepad.com/nonprofit/2008/12/nonprofit-unrel.html

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