Micro Franchising: The Next Big Small Thing?
Charles (Chuck) Slaughter, President of Living Goods, led a session today at the Skoll World Forum on micro franchising. Compared to the related model of micro credit, micro franchising is a relatively new concept for targeting social impact in developing countries. Given the fresh nature of the topic, much of the session was aimed at getting a sense of what we know about the successes and failures of this model to date.
As a quick primer, Chuck started off with a working definition of franchising. He summarised it as a standardized business model implemented by a network of independent agents. Famous examples of franchises in the USA are Subway, McDonalds, and 7-Eleven. The franchiser creates a brand and then licenses that out to the franchisees.
Chuck originally got the idea for using this franchise model at a micro level when he was visiting a health products store in Kenya. He noted that the employees spent a lot of their time with nothing to do. When the store was busy, they would sell products. But then there would be a lot of time without customers in the store when they just sat there drinking tea. This motivated the idea of a mobile sales force going out into the community. Chuck also realized that such a model has already been successfully used by Avon. So he drew on many of the best practices of Avon to shape his ideas for Living Goods. You can read more about the Living Goods model here: http://dowser.org/charles-slaughter-of-living-goods-applies-the-avon-model-to-healthcare-in-uganda/
The audience for this session had a considerable amount of experience related to micro franchising. Chuck quickly tapped into this knowledge by asking the audience for their experiences so far. Audience members posed questions such as:
- How do you balance the trade-offs between expanding your distribution through franchising and the risk of having your brand name damaged by rogue franchisees?
- What is the appropriate approach to screening potential franchisees?
- How might micro franchising imitate the successful growth of the micro credit movement over the last four decades?
- When is the right time for a business to begin attempting to replicate its model via franchises?
Much of the discussion drew on the audience members’ personal experiences and highlighted the fact that this is still a very new business space. There remain many open questions as to how micro franchising may best be implemented. Chuck closed with the following thoughts… There aren’t blazing success stories in micro franchising yet. But he believes the need is definite, the economic benefits are solid, and the potential for growth is huge.