Entrepreneur woman selling food in Monrovia, Liberia

MICROFRANCHISING: The ultimate way to think globally but act locally

Last updated: April 2nd, 2019

We all know the term franchising, right? We know that some of the biggest brands in the world are actually franchises—names like McDonald’s, KFC, Dunkin’ Donuts, Hampton by Hilton, 7-Eleven, and so on. But how many of you have ever heard the term microfranchising? I wouldn’ be surprised if very few of you actually have heard the term before, but it’s actually a very important business model that generally is found in developing countries. Microfranchising is becoming a stronger and stronger presence in those areas, and really does provide the ultimate way to think globally while acting locally.

Let’s take a closer look at the role microfranchising is playing in the global marketplace.

According to Microfranchise Ventures, there’s a “direct correlation between the strength of the franchise economy and per-capita GDP in every country on Earth.” Here’s the issue. Franchises generally require a significant amount of capital to get started, and even more to maintain. The general population in a developing country doesn’t have a significant income or access to such figures, so franchising with traditional brands is just not a reality. What is a reality, however, is microfranchising. For a significantly lower investment, an individual can purchase a ready-made business-in-a-box and become a successful business owner, eventually raising themselves and their family out of poverty.

What is microfranchising?

Microfranchising is fundamentally a model designed to help people get out of poverty. It’s similar to a traditional franchise business model, but with drastically scaled-down start up costs so that it’s affordable to people with a low income. Microfranchising takes the traditional franchise business model and scales it down to very small businesses. Microfranchising is, at its definition, “a systematized approach to replicating microenterprises like coffee kiosks, mall products and services, food stands, and just about any other type of business that sells low-cost products or services, primarily in high traffic areas,” according to Forbes Magazine.

Microfranchises, as you would guess, have the same advantages as traditional franchises, including name or brand recognition, a proven, established business model, marketing support, help from the franchisor, and in many cases, supplies. There’s generally a social mission behind the microfranchise, promoting goods and services that help provide employment and income in addition to addressing specific health or environmental challenges that the population experiences.

Microfranchising is especially impactful in developing countries, where people don’t have the skills or resources to start their own businesses from the ground up. What they do have, however, is a desire to work and provide for their families, and once provided with a ready-made business—complete with the supply chain, systems, any legal issues, licensing or real estate—they can thrive and provide that living for themselves and their families, and eventually expand their business and provide jobs to others.

A microfranchise is a ready-made business opportunity model that someone can step into. It’s often referred to as a business in a box/bag/backpack, because in many cases, everything the person will need to start their business literally is provided in a bag, box or backpack. Initial training is provided, along with ongoing support and mentoring.

Examples of microfranchises

  • Protein-rich milk and ice cream products delivered via bicycle (Fan Milk)
  • An eyeglasses business in a bag (VisionSpring)
  • A taxi service that provides drivers with a safe, reputable taxi business (Valet Taxi)
  • Packaging and selling safe drinking water (Jibu)
  • Distribution of gas stoves and photovoltaic kits
  • Fresh, affordable food distribution
  • Feed, seed and veterinary medicine
  • Dairy farming
  • Health care centres
  • Preschools

Microfranchising is becoming more widely accepted as a viable avenue out of poverty in many developing countries, including rural India, Bangladesh, Peru, Central and South America, Africa, and parts of Asia. While on the surface it seems like it would be a no-brainer, the businesses are having to address certain cultural issues that traditional franchises don’t often encounter, including a change in mindset to becoming a business owner and also tackling some traditional gender-role barriers.

There is no arguing, however, that microfranchising is an effective way to create wealth at the bottom of the pyramid. Start-up costs are often only $1,000 (US) or less. While this is still a large sum of money, those who are interested in pursuing this type of venture can benefit from small loans (microfinancing) that they can pay off in a relatively short amount of time.

Bike fruit sellers in Kathmandu, Nepal
Fruit sellers in Kathmandu, Nepal selling their goods from their bicycles

Steps to microfranchising

  1. A gap or need is identified – In the case of VisionSpring, the founders learned that people were unable to continue working due to deteriorating eyesight. So they identified a need to provide ongoing eyeglass solutions that would allow people to continue working and providing for their families.
  2. A business model is identified to solve the gap – The business model goes beyond offering a one-time solution. The objective with a microfranchise is to offer a sustainable, viable solution for the franchisee and for the area.
  3. The model is tested in the market to make sure it’s sustainable – Adjustments will be made based on those outcomes. Franchisees often will make further adjustments based on their real-world application of the microfranchise model.
  4. Finally, the business is replicated – More franchisees are recruited and the business scales up.

How microfranchising differs from traditional and social franchising

Microfranchising is not the same as social franchising. Microfranchising doesn’t necessarily focus on bringing goods to the poor, but offers solutions to help people get out of poverty by offering them a business model to follow. It turns individuals into business owners. Social franchising delivers goods and services to the poor, but doesn’t necessarily turn individuals into business owners.

Compared to traditional franchises, there’s still a relatively small number of microfranchises, fewer than 100 in 20 countries, and there’s little or no oversight or governing body (anything similar to the International Franchise Association—IFA—for traditional franchises). While it’s a for-profit business model, they don’t necessarily have the same objectives as a traditional franchise business (profitability and growth). In fact, profitability of the franchisor is often not as relevant, although financial stability is paramount to the survival of the entire network.

Franchisees will not have business experience, often not even any level of formal education, which is something that traditional franchisors will look for. Microfranchisees are remote, often without access to reliable transportation. The focus is really on providing solutions to help keep people from slipping into poverty. In fact, in Kenya there’s even a program called Girls Empowered by Microfranchise Program that connects young girls with franchisors to help them launch their own businesses.

Advantages of microfranchising

  • Offers long-term sustainability to help fight extreme poverty.
  • Creates opportunities within a community that didn’t previously exist.
  • Individuals become business owners without the difficulties or risks of becoming an entrepreneur.
  • As the individuals succeed, they can expand their business by hiring their family members and other members of the community, which provides additional job opportunities and results in a growing business for the microfranchisee.
  • Those impacted by microfranchising have a source of income that gives them greater access to goods, healthcare, medicine, schooling, housing and so on.
  • Each franchisee can innovate and adapt the business in ways that only they would know how to do. It becomes “on-the-ground ownership.”
  • Those who feel that sense of ownership are empowered to drive their business to succeed.
  • Products can be sold through vendors who are already used to selling and are located in high traffic locations such as markets and shopping areas.
  • They are very reactive, ready and able to adjust to failure and improvement much faster than a traditional franchise model can.
  • There’s a low barrier to entry to become a business owner.
  • It’s an effective tool to fight bribery and fraud.
  • Teaches financial literacy and responsibility.
  • Offers economies of scale, branding, quality control, best practices and operating procedures.

Microfranchises thrive in places where traditional, big franchises would not, in areas where people cannot afford to make a substantial investment ($10,000 or more) into a business. In fact, those other, larger strategies aren’t going to solve the problems that either the microfranchise business addresses or solves through providing business opportunities.

I anticipate that we’ll see microfranchising continue to grow and expand, particularly as more and more big businesses recognize the importance of playing a role in fighting global poverty and using their position to impart change on areas where people need to have the right opportunity to succeed.


image 1: MickyWiswedel via Shutterstock; image 2: idome via Shutterstock

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