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Thursday, August 26, 2010

Support for Microfranchising: Knowledge, Funding and Missing Links

By Shital Shah

Microfranchise: An idea on the rise.

This post is the final entry in a series introducing iuMAP, focused on microfranchising.  There has been some great discussion of microfranchising recently (such as this SSIR article), and this series provides an overview of different types of microfranchising, profiling many enterprises that are employing the method, and providing information for both investors and entrepreneurs. This final post focuses on existing support for microfranchising models.

* * *

For the last month or so, we've covered the different types of microfranchises as they exist today. The series has also included interviews with researchers and practitioners. In this final post, we'll cover existing support for microfranchising. 

As more businesses see the value in microfranchising, and as others try to learn more about the concept, building a support network will require information sharing, appropriate linkages, and fund efforts underway.  Often, there is talk of building an "ecosystem" for social enterprises to thrive; similarly, microfranchising will also require building blocks to propel it forward.

As practitioners and academics explore this concept, valuable pieces of research have helped identify trends and gaps, and upcoming publications promise to provide even more context.  For readers that want to dig deeper into this idea, there are a number of useful resources.  Jason Fairbourne, out of Brigham Young University, is leading the MicroFranchise Development Initiative, which aims to research and develop microfranchising as an economic development tool.  Dalberg's report on Franchising in Frontier Markets, covered by NextBillion here and discussed yesterday in Tayo's post, provides a critical, global outlook and raises pertinent questions for further research.  Acumen Fund reflected on the experiences and lessons learned from their investees, Drishtee and VisionSpring, through a working paper.

An upcoming book by Nick Sireau of Solar Aid is called Micofranchising: How Social Entrepreneurs are Building a New Road to Development and will focus on how microfranchising can be used as a tool for poverty reduction in Africa.  Kirk Magleby's book, Ending Global Poverty: The Microfranchise Solution, also focuses on microfranchising as the "most important business model on earth."  Books and papers like these not only serve to provide information and analysis, but are an important way to raise general awareness about microfranchise as a viable business option.

Others are filling in gaps on missing links in building businesses.  Milaap, for example, is developing an online platform that offers loans to help franchises with their start up costs - a major hurdle for an infrastructure based model, as we discussed before.  The Microfranchise Development Corporation also supports different initiatives in this arena by helping to build businesses using microfranchises.

Besides building knowledge and making links, money is always needed to fund efforts.  Several players have already started funding microfranchising projects.  The Clinton Global Initiative has a commitment focusing on market based solutions beyond microfinance, including microfranchise.  The World Bank Development Marketplace is another arena that has supported microfranchise models with IDE Cambodia.  Not surprisingly, there are not many funders in this space yet - whether this is due to the lack of viability of most models, high risk, or low levels of awareness amongst funders, without more sources of funding, microfranchise will see difficulty in moving forward.

The research is growing, but the case study options are limited.  If funders encourage the development of microfranchises, and organizations like Milaap provide the necessary linkages, we may see further implementation of this concept.  Perhaps the tendency to speak in a very general way about microfranchises or the common use of for profit examples, such as McDonald's, rather than successful hybrid models, points to the need for further support for microfranchising in the social enterprise sector.  As various stakeholders - universities, experts, umbrella organizations, corporations - get involved, we'll see an expanding support network for microfranchises, which will hopefully also lead to stronger, more established and replicable models.

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