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Micro Franchising Working Paper

Micro Franchising Working Paper

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Published by: Felipe Arango on Jun 19, 2010
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Written by David Lehr (dlehr@earthlink.net)
August 2008 · Working Paper
Microfranchising at theBase of the Pyramid
 
Microfranchising at the Base of the Pyramid
2Working Paper —Copyright © 2008 Acumen Fund
Contents
Introduction 3Franchising and Microfranchising: A Brief Overview 3Microfranchising Is It the Cure-All? 5Organizational Snapshots Drishtee, VisionSpring, HealthStore Foundation 6Different Models, Common Concerns: Issues in Microfranchising 71. Lessons Learned in Creating the Microfranchising Model 7
1.1 Developing a successful microfranchising model is expensive.
7
 
1.2Microfranchisingmodelsshouldbewelldocumentedandsimpliedwhereverpossible.
8
1.3Efcientsupplychainsareneeded,butdifculttocreate.
8
 1.4 Location matters.
9
 1.5 Brand matters.
9
 
1.6Contractsandlegalconsiderationsmustbesituationallyappropriate.
102. Lessons Learned in Understanding Microfranchisees 10
 
2.1Microfranchiseesaredifculttond.
10
2.2Microfranchiseesrequirenancing.
11
 
2.3Franchiseesmustbeprotable,quickly.
11
2.4 Resistance to franchisee fees increases over time.
123. Lessons Learned About Operating a Microfranchising Organization 12
3.1 Local policies and regulations matter.
12
3.2Qualitycontrolisessential,particularlywithhealthofferings.
124. Characteristics of a good franchisor 13MicroFinance: Successes and Boundaries 13Moving Forward: Taking Microfranchising to Scale 14Microfranchising Some Final Thoughts 15AppendixDrishtee (Kiosks) 16VisionSpring (formerly Scojo Foundation) 20The HealthStore Foundation (HF/CFWshops) 24
 
Microfranchising at the Base of the Pyramid
3Working Paper —Copyright © 2008 Acumen Fund
Introduction
 As the search for market-based approaches to alleviatingpoverty continues, microfranchising is quickly emerging as apowerful new tactic. Microfranchising is a development toolthat leverages the basic concepts of traditional franchising, butit is especially focused on creating opportunities for the world’spoorest people to own and manage their own businesses.
Recognition of microfranchising’s eectiveness is growing,
 but there remain many questions about how this emergingdevelopment tool is working and exactly what we can expectfrom microfranchising in the future. Few comprehensivestudies have been conducted, and to date only anecdotal stories
from the eld have been available.
To begin understanding the promise and the mechanismsof microfranchising, Acumen Fund India led a workshop
1
inlate 2007 on the more general topic of franchising in India.This paper builds upon the cross-cutting issues and insightsuncovered at that workshop by paying particular attention tothree leading microfranchising organizations that partner with
 Acumen Fund. Specically, this paper introduces and explains
the business models and lessons learned from Drishtee, VisionSpring (formerly Scojo) and HealthStore Foundation.This paper starts with an introduction to microfranchisingand its potential. It then takes an in-depth look at how theseorganizations actually work and the challenges and successesthey have encountered to date. The paper ends with a brief 
discussion on micronance, another very successful approach
to poverty alleviation, and some recommendations on
how microfranchising and micronance can build on each
other. Details on the models that Drishtee, VisionSpring andHealthStore Foundation have implemented are included in the Appendix. Examples from other franchisors that support thelessons learned are also highlighted.
Franchising and Microfranchising: A Brief Overview
Microfranchising has its roots in traditional franchising, whichis the practice of copying a successful business and replicating it
at another location by following a consistent set of well-dened
processes and procedures. In traditional franchising, thefranchisor (who owns the overall rights to the business) sells orlicenses its systematized business approach to a franchisee. Thefranchisor typically controls many of the macro aspects of the business such as creating and marketing the brand, procuring
inputs, continuously rening the model, and recruiting and
training franchise operators.
About 40 minutes away from the capital of Assam, India, is the village of Amlighat. With around 1,000 residents, Amlighat isno different from other small, and often impoverished, villages nearby – except for the presence of a Drishtee kiosk. JamunaSharma, the kiosk’s owner, used to spend her days helping run her husband's local dairy farm and looking after their twochildren. Early in 2008, however, she became a provider of health services in Amlighat.At a Drishtee-sponsored gram sabha (community meeting), Jamuna learned of the opportunity to manage her own business,
a Drishtee microfranchise offering basic medicines and healthcare products. With an investment of $150 (nanced with a
one-year microcredit loan), Jamuna has begun selling products ranging from women's health and hygiene (contraceptives
and sanitary pads) to supplements (ber and glucose) and medicines targeting gastrointestinal maladies. With the money she
earns each month – roughly $30 – Jamuna now exercises a degree of choice that was just not possible before. This choice – a
function of greater nancial freedom – may perhaps be the greatest return on Jamuna's investment.
Drishtee – Providing Opportunity Through Microfranchises
1
 Acumen Fund is a 501(c)3 social venture fund that invests in enterprises that oer access to critical, aordable products and services to the poor through
scalable, market-oriented approaches. Acumen Fund India led a workshop in October 2007 in conjunction with the Indian School of Business, Wadhwani
Centre for Entrepreneurship Development, to examine franchising in India. Attendees included leading academics, Acumen Fund sta, and senior
management from Acumen Fund investees VisionSpring, Drishtee, Medicine Shoppe, Ziqitza Healthcare and LifeSpring.

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