Potter in Bangladesh. Photo credit: Ferdous Tasni, 2014 CGAP Photo Contest.
From McDonald’s to Subway to Pizza Hut, franchise businesses are so common in the United States that they are often taken for granted. Franchising accounts for almost 9 million jobs in the U.S. and brings dozens of small businesses to almost every community in the country through a methodology that masters replication and scale at a massive and often highly profitable level.
From Franchise to Social Franchise
What if the power of the franchise was turned into a tool for solving developing world problems such as lack of access to clean water, modern energy sources, pharmaceutical medicines or agricultural inputs and know-how?
The practice of Business Format Franchising, the technical term for a modern, well-organized franchise network, has been harnessed as an effective delivery mechanism through a methodology called Social Sector Franchising (sometimes known as microfranchising) by dozens of NGOs and socially oriented businesses in Asia, Africa, Latin America and other places including the U.S. and Europe.
Farm Business Advisors in Cambodia
In Cambodia, 90% of the poor live in rural areas, relying heavily on agriculture for their livelihoods. However, the lack of irrigation and water control systems, poor seed quality and limited access to market information have prevented many of these people from earning enough to support their families through agriculture.
Lors Thmey, a Cambodian social enterprise established by iDE Cambodia, uses a network of 235 franchised farm business advisors to provide advisory services and agricultural inputs (such as seeds and irrigation equipment) to encourage and equip farmers to grow market-oriented crops. Farm Business Advisors (FBAs) sell products at a profit, often on credit with payment due at harvest, and provide technical advice as an embedded service during return visits throughout the growing season. FBAs, recruited by iDE, which acts as a central Franchisor enterprise, earn commissions on agricultural inputs that they sell and profit from their own crops, which double as demonstration plots. Their farmer clients benefit from products and advice that reduce risks, improve yields and increase incomes.
The enterprise is profitable at the farmer and FBA level, near break-even at the provincial branch level, and aiming for profitability at the national level in the next 3-4 years. In partnership with World Vision Australia, the Lors Thmey business model will expand its customer base in existing World Vision project areas, linking farm business advisors to World Vision communities.
Agro-dealers in Bangladesh
Dairy production in Bangladesh suffers from many challenges including disease, low production cattle breeds, and a lack of inputs such as medicines and feed. An innovative microfranchise model called Krishi Utsho (agro source in Bengali) launched by CARE Bangladesh has developed a network of over 110 franchisee agro-dealers who serve over 30,000 farmers. They provide a wide variety of products such as medicine, feed, vitamins, machinery, and seeds, coupled with information and agricultural extension services, making it a one-stop solution for farmers’ input supplies.
Since the microfranchise network was launched, average milk production has increased by more than 50% and is expected to rise as new strains of more productive cattle begin to produce milk. Krishi Utsho conducted an in-house survey on 400 randomly selected farmers to measure its impact. The survey found that farmers’ income increased by 30%, food spending increased by 10%, and distance travelled and cost to access input reduced by 50%. Quality of products has substantially improved. All the franchisees were able to break even within 12 months and many have doubled revenue. Krishi Utsho as franchisor is projecting to break-even within 3 years.
Krishi Utsho is also a women’s empowerment program fighting discrimination by giving women opportunities to own franchises providing livestock health services. Women own 23% of Krisi Utsho franchises but this figure will grow as CARE makes more microfranchises available to women.
Supporting Social Franchise Entrepreneurs
These are just two examples of how social sector franchising is serving customers usually considered too remote or poor to reach and creating entrepreneurship opportunities for women and men from these rural communities. By scaling up agricultural input supply and extension services, food insecurity is reduced in areas where reliable access to abundant and nutritious food is not always possible.
Through its Center for Social Innovation and Enterprise (CSIE) at the University of New Hampshire, the Social Sector Franchise Initiative (SSFI) works to build awareness of franchising as a robust and scalable business development model for low-income communities. The SSFI sponsors an annual Social Sector Franchise Innovations Roundtable and is launching a groundbreaking Living Case Study action research and learning project that will assist several social franchise entrepreneurs with one-on-one technical support while providing learning opportunities to practitioners and the wider learning community. In partnership with the University of New Hampshire, the International Franchise Association will supply expert commercial franchise mentors through its Social Sector Task force.
Join SSFI at the workshop session at 2016 SEEP Annual Conference in September to learn more about the Cambodian Farm Business Advisors and the Bangladeshi Agro-dealer microfranchise programs, and about how social sector franchising is growing across the globe as an anti-poverty and food security strategy.
The Microfinance Gateway is proud to be an outreach partner for the 2016 SEEP Network Annual Conference, with the theme of Expanding Market Frontiers.
This blog was originally posted on The SEEP Network’s website as part of their ongoing Annual Conference - Peer Learning Session series.
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