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The Vision of MicroFranchising

Posted on Sunday, May 6th 2007

By David Stoker, Guest Author

MicroFranchising is a development tool that seeks to apply the proven marketing and operational concepts of traditional franchising to small businesses in the developing world. The primary feature of a MicroFranchise is its ability to be streamlined and replicated. The businesses are designed for microentreprenuers and usually target development issues such as health, sanitation, and energy.

Some fundamental principles of microfranchising, as taken from a paper entitled, ‘Microfranchises as a solution to World Poverty’ authored by Kirk Magelby, a leading proponent of the concept:

(1) Franchising has shown remarkable efficiency and financial success.

The franchise model is “well-known and thoroughly proven”. “Scarcely noticed 50 years ago, franchising now accounts for 10 – 25% of gross domestic product (GDP) in most Organization for Economic Co-operation and Development (OECD) countries.”

(2) Microfranchising can create jobs.

“People living in poverty yearn for jobs, but most have no choice other than high risk, low return self-employment in the informal sector… The franchise business model is uniquely adept at creating large numbers of locally-owned, successful Small and Medium Enterprises (SMEs) … Franchises almost always generate higher levels of employment than individually-owned businesses”

(3) The timing is right.

The microfinance industry has credited mechanisms and systems for financing that would have previously limited the growth of microfranchises.

Some advantages of microfranchising as taken from a list of Frequently Asked Questions, authored by Stephen Gibson, an early pioneer:

1. Replicates the performer’s winning business
2. Removes the creative burden from the potential franchisee
3. Provides a superior method of transferring technology
4. Reinforces vital business skills and practices necessary for greater financial growth.
5. Forces a mentor relationship
6. Reduces the odds of failure during the start up process
7. Speeds the exit out of poverty and to economic self-reliance
8. Enables more small business owners to take advantage of market opportunities.
9. Allows for economies of scale in purchasing and advertising.
10. Eases the challenges of a fresh start-up because systems are in place.

Next Post: Grameen on MicroFranchising

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