NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

A poised, articulate individual, Liza Kimbo, Director of CFWshops Kenya, seemed just like the kind of person who could lead a successful BOP enterprise. Before the holidays, Liza delivered a presentation about her organization at a brownbag hosted by the Grassroots Business Initiative at the International Finance Corporation, a sponsor of CFWshops. Tough questions, from CFWshops’ relationship with the Kenyan government, to whether CFWshops really serves the BOP, were asked by audience members and given full answers by Liza (the following is not a verbatim account):

Q: Could you describe the startup process for CFWshops’ franchisees?
A: Someone interested in starting a franchise might approach us and propose a location for their franchise. We require up-front a $200.00 deposit, a portion of which goes to the organization and a portion to the franchise’s startup costs. The individual usually also applies for about $1000 in loans from us to cover the rest of the startup and initial stocking costs. We currently process these loans in-house but are planning to partner with banks that can take over franchise financing since that is not our area of specialty.

We provide business and some medical training to franchisees for four weeks. After they begin to run their business, we provide ongoing training, at least once per year, and also audit each location.

While we don?t currently charge any membership fees to the franchises, we plan to start charging a $10/month/franchise fee beginning sometime next year. The only revenue we receive from franchises right now is a 15-20% mark-up that is built into the prices of all the products sold by the franchises.

Q: What is the level of interaction between CFWshops and the Kenyan government?
A: For the first two years, we only worked with local district medical health teams and not the Ministry of Health. District-level officials are supportive of our work because they are expected to report improvement in health outcomes but have no budget to improve anything. So for two years, we worked under licenses issued at the district level. After we had already established 26 franchises, we approached the Ministry of Health and submitted paperwork to register with them, but the paperwork is still in processing.

Q: From a nurse’s perspective, what are the benefits of becoming a CFWshops franchisee?
A: We ask all franchisees the reasons why they decide to join. Keep in mind that it is possible sometimes to make more money selling black market drugs, which of course are not under price control as are our medicines. The number one reason is because we offer a reliable source and quality of drugs. The second reason is because we offer regular training.

Q: What is the financial profile of the average CFWshops customer, e.g., low-income? or middle-income?
A: In rural areas, maybe the top 5% of income earners customarily go to big towns for their healthcare, and this does not change with the introduction of a CFWshops franchise. 95% is left without healthcare options. The bottom 20% or so are out of the cash economy. Maybe 50-60% of the rural population constitutes our customer base. Some are subsistence farmers and can still come in to pay for basic medicines. Our average transaction cost is $0.50-$0.60 for medicines, and $0.20-$0.30 to see the nurse. For people who are paid daily wages, we?re a one-stop shop. There’s no need to spend 2-3 days traveling and looking for healthcare. A bit better off than subsistence day laborers are landowners who make about $2/day. We also serve them.The situation is the same among the customers of slum outlets, like in Kibera. We serve people who look every day for work and get paid for daily work. The wealthy in cities still use their traditional providers.

Q: What was CFWshops’ start-up process?
A: We would have done things much differently if we knew then what we know now after running CFWshops for five years. We had never worked with community health workers. We didn?t know what was already there in the communities. We started with only one trainer, field officer, and office administrator. We went around to find community health workers and started with 11 franchisees. There was a lot we didn?t consider, e.g., quality control, marketing, promotions, licensing issues, etc. We plan to build off the knowledge we’ve gained over the years to improve CFWshops and potentially to establish similar organizations in other countries.

For more information, read the HealthStore case study.

Note: Regarding the distinction between the HealthStore and CFWshops brands, HealthStore is the name of the US-based non-profit involved in fundraising for CFWshops, the name of the actual franchise organization in Kenya.