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March 23, 2009 / compassioninpolitics

Micro Enterprise and Micro Franchising Examples from “Ending Global Poverty”

The Case for MicroFranchising: Opportunities and Risks
Ending Global Poverty: The Micro Franchise Solution” by Kirk Magleby is an interesting and quick read about what could very well be the next stage of micro enterprise and micro finance institutions. First it makes a case for microfranchises because they create efficient systems and networks with save money and scale well. Not all people are meant to be entrepreneurs, which is why some micro enterprises fail. Instead of creating unconnected micro-enterprises, the micro franchise model should be used to help provide sucessful, proven, and efficient models for business success. Magleby points out that many businesses such as the phone ladies are based on the micro franchise business model. Several key industries that are viable for micro enterprise and micro franchise.

Ten Areas to Consider for Viable MicroFranchising Businesses:

• Accounting services, agricultural inputs, apparel
• Bakeries, barber shops, beauty parlors, bicycles, building materials, butcher shops
• Construction, cooking oil, cosmetics, courier services.
• Electrical contracting, equipment rental (wheelbarrows, bicycles, etc.)
• Financial services, food, fuel, furniture
• Hardware, house wares and other specialty retailers.
• Movie theatres
• Plumbing contracting
• Renewable energy, repair shops.
• Transportation for commodities, transportation for people.

To me as concerned outsider, I think the starting point should be the 7 sectors discussed in “The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid” from the World Resources Institute, because it seems to focus on the base of the pyramid and then consider informal economies and less important sectors. But certainly the best market for a given and even the money earned in a non-base of the pyramid business (ie perhaps travel) can be used to fund other ventures aimed at the BOP. Given that there may be more margins in these markets and these levels of affordability, a concern should certainly be paid toward their encouragement.

Guiding Principles for MicroFranchising Businesses
If we look to the work of Paul Polack , he would suggest going to where the action is, talking to your target market directly, and focusing on simplicity and affordable pricing. Then (and perhaps only then) is pursing research in parallel markets and businesses truly viable (although its a bit chicken and egg because those issues are in some regards co-determined).

Magleby includes a great list of 69 micro franchises. I’ve included:

Twelve micro enterprises that are successful micro franchises

1) Cebicherias Chiqui, Peru, 5 lunch stands
2) Casa por Casa, Mexico, 18 advertisings agents (IF)
3) Ingles Individual, Mexico, 70 language tutors, (IF)
4) UV Water, 100 village water systems
5) UMU, Uganga, 125 microfinance agents, MFI
6) Pride Africa, Kenya, 250 microfinance agents, MFI
7) Cemex Patrimonio Hoy, Mexico, 500 local promoters serving 120,000 construction jobsites (MNC)
8} Yogurt Persa, Yougurt Tito, Ecuador, 35 restaurants, IF
9) ES Coffee, Ecuador, 2,500 coffee producers (IF)
10) Grameen Uddog, Bangladesh, 4,500 textile weavers
11) Vodacom Phone Centers, South Africa, 5,000 phone centers, MNC
12) Unilver, Vietnam, 145,000 sales agents, MNC

If you would like to learn more about micro franchise you can:

• Read a free draft publication of “Ending Global Poverty” by Kirk Magleby on the web
• Get the “Ending Global Poverty: The Micro franchise Solution” by Kirk Magleby on Amazon
• Read the microfranchise blog or the microfranchise wiki
• Consider the microfranchising toolkit or other micro franchising books.
• Check out some of the case studies and country studies from the Next Four Billion
• If you’re more serious about moving forward with an existing franchise or building out a micro franchise network of your own you may want to check out the resources at Entrepreneur and this Franchise know how checklist

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9 Comments

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  1. Chris White / Apr 13 2009 10:11 am

    Firstly, I just want to tell you how much I appreciate your blog. The range of topics you cover are fascinating and always usefully well covered. And your SEO is impressive!

    Secondly, I’ve been digging around a bit and I am having a hard time finding examples of large corporations that have used micro franchising to achieve significant scale. Which large companies/MNCs do you feel are the main proponents of this?

    Thanks – and keep up the great work!

    Chris

  2. compassioninpolitics / Apr 13 2009 11:06 am

    Chris,

    Thanks. Likewise I enjoyed your blog.

    In my cursory research, I noticed Citibank made forays into this area. Actually, a couple others have taken micro finance on as well: “ABN Ambro, Bank of America, Citigroup, Deutsche Bank, Fitch Ratings, JP Morgan Chase, and Standard & Poor’s ” I guess its a more natural extension of their corporate market niches. Whether it serves their CSR or they make an explicit effort to push the CSR angle is an interesting question. I can’t imagine them not double dipping from a PR perspective–but honestly I’m not sure.

    I know Forbes has a top list of micro-finance institutions (although I believe thats qualitative rather than quantitative).

    It would be interesting to hear what is going on in that space. I believe that increasingly CSR and micro finance are great platforms for branding/marketing for Fortune 500 businesses.

    I believe the folks at Accion International should have your answer. They collaborate with corporations from my understanding.

    You can also check out this article I quoted above: http://www.urlzen.com/c5p

    Take care,
    Nathan

  3. christopherjohnwhite / Apr 22 2009 7:28 pm

    Hey Nathan,

    Sorry for the delayed response. Is there a way to add alerts for updates on comment threads I participate in on your site?

    Thanks for the references, including http://www.urlzen.com/c5p.

    Yeah, there are a lot of mainstream banks starting to get into microfinance, it would seem – either as direct lending or as onlenders to Micro Finance Institutions.

    On the microfranchising-by-MNC front, Nestle in Cote d’Ivoire and a couple of other countries are doing some good stuff, but I’m not finding much else. Feel free to send references my way!

    Keep up the excellent blogging! I added you to my blogroll today :)

    Chris
    http://csr4ceos.typepad.com

  4. compassioninpolitics / Apr 22 2009 10:24 pm

    Chris,

    The wordpress hosted blogs unfortunately don’t offer that feature I don’t believe. Not sure why.

    I need to make the jump to self hosted…and soon. :)

    I’m not sure if that is the wealth of what models you are examining/researching/and advising…
    I’m curious if a “Buy One Give One” model would work. I’m hoping on posting on it in the next 24 hours. The rise of TOMs Shoes and the One Laptop per child point that this is a viable business model and in the case of Toms shoes, one which dramatically increases marketing costs.

    Thanks for the add. Will do the same.

    Nathan

  5. christopherjohnwhite / Apr 23 2009 7:02 am

    Thanks Nathan. Keep on the meaningful blogging :)

  6. tozé / Mar 22 2011 4:25 pm

    Hello,
    I’m a student and I need some information about franchising. Could someone tell me if there is some kind of list with the most usual franchising business? I’m looking for examples of franchising taking account the different types of franchising.~

    thank you =)

  7. compassioninpolitics / Mar 23 2011 2:50 am

    Toze,

    I suggest you check out the “Micro-franchising E-book”–it focuses on developing countries & is available both on Next Billion & is on Scribd.com

    • Tozé / Mar 23 2011 3:31 pm

      Thank you a lot.
      Excellent blog =)

Trackbacks

  1. Best Social Business Venture Posts of 2009 « Compassion in Politics: Christian Social Entrepreneurship, Non-Profits, and Base of the Pyramid/BOP Design Solutions

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