Franchising for Development; Stimulating entrepreneurship for the bottom of the pyramid

Seminar

The NCDO Business in Development ‘Franchising for Development’ seminar focused on the concept of microfranchising, the replication of successful business concepts in developing countries. Franchising stimulates entrepreneurship by producing or distributing products or services for the Base of the Pyramid (BOP) more efficiently.

Two international speakers were invited to speak at the seminar. Jason Fairbourne, the director of the Microfranchising Development Initiative, gave an enlightening presentation on the logics of the concept. In the US franchising accounts for more than 1 trillion in sales and in developing countries microfranchising can spark a movement for a stronger market economy. Franchises are generally more successful than stand-alone businesses because of the proven business concept, the established brand, the defined operations, the well defined cost structure and operational support.

Acumen Fund supports entrepreneurs that are focused on offering critical services – water, health, housing, energy – at affordable prices to people earning less than $4 a day. Varun Sahni, director of the India Office, spoke about two successful microfranchising cases. The fund invests in the Scojo Foundation that has sold 45.000 glasses through 500 active vision entrepreneurs in India alone. There are also over 1600 Drishtee Kiosks connecting more than 700.000 people in India. An important insight that Varun shared with us is that designing the ideal franchise concept requires a dynamic recording and assessment of unit economics per franchisee. If the unit economics don't make sense the franchise will fail.

Jason Fairbourne also touched on some challenges, that the three case studies at the seminar, NICE, Business in a Box and Young Africa, recognized. The start-up costs of the first franchise can be very high, the laws and regulations in a country can be challenging and it can be difficult to find qualified entrepreneurs to lead the franchises. In the lively panel discussion with the speakers and the 70 participants of the seminar the challenges and opportunities where assessed. Gambians, when asked what they prefer, the ability to watch the 2010 World Cup or clean water, would not understand the question, because obviously they preferred the World Cup. An interesting insight by Jan Willem Langeraar, the director of NICE shops in Gambia, where the World Cup will be shown on big screen in 2010.
By Brisa Keizer, Business in Development of NCDO

Press Coverage

Article by Sharida Mohamedjoesoef in De Pers (in Dutch): See pdf attachment below

Article by Hans van de Veen in People Planet Profit

Article in ISNet

Goal of the seminar

This seminar aimed to connect people around this subject and gave the participant the opportunity to learn more about this innovative concept that is gaining grounds internationally.

Franchising in developing countries

Microfranchising is important for entrepreneurship in developing countries. The proven, step by step, process of setting up a Microfranchise stands a higher chance of survival in comparison to stand alone start-up businesses and they tend to grow faster. Furthermore microfranchises adopt a proven concept which can result in mutual profit for the franchisee and franchisor.

Franchisor

A franchise package can be developed by an entrepreneur who wants to grow, a NGO or microfinance institution looking for a higher developmental impact, or a Multinational that wants to distribute its innovative BoP product in developing countries. Such a package can include any number of the following: an operations manual, a training, access to the supply chain, hardware, sales strategies, product sourcing, credit, branding or marketing.

Franchisee

Not everyone has the entrepreneurial spirit to come up with a brilliant business idea or the necessary skills to make it happen. A franchisor can offer a franchisee a proven business model and step-by-step guidance that greatly enhances the chance of success and economic self-reliance. The franchisee doesn’t have to re-invent the wheel.