Micro-Franchises Provide Business Solutions for Poverty
Thursday, June 26, 2008
It’s no secret in the business world – if you want to start your own business with little risk, you buy a franchise.
For decades, successful American businesses have been franchised, allowing would-be entrepreneurs a safe place to begin their business. Thanks to a team of BYU researchers and developers, the success of franchises is being used to bring people out of poverty through a new initiative called micro-franchise.
For years, economic development practitioners have used micro-finance as a tool to alleviate poverty. Micro-finance organizations give small loans, or micro-loans, to individuals otherwise unable to obtain necessary capital to start or grow a small business.
Many recipients of micro-loans, however, have struggled to get their businesses off the ground, lacking basic business skills.
“Giving micro-credit helps, but it’s not the full package,” said Jason Fairbourne, micro-franchise initiative director at BYU.
More than three years ago, Fairbourne began working on developing what was originally called the “business in a box” model to address some shortcomings of micro-credit.
“Plumbers pass on their trade through an apprentice program,” said Steve Gibson, a micro-franchise researcher and business professor at BYU. “New doctors have a residency program to learn from established doctors; however, entrepreneur wannabes have no such mentoring program.”
Micro-franchises as defined by the initiative Web site are “small businesses that can easily be replicated by following proven marketing and operational concepts.” Micro-franchises provide entrepreneurs with small franchises that require little start up costs.
“A franchise in a third world or developing country might sell for somewhere between $25 in the case of rat catchers in India to $6,000 in the Philippines [for] a retail cell phone store,” Gibson said.
These little franchises create a training ground for budding entrepreneurs in the third world, Gibson said. Thus, even those who have little money can learn from those who have experience.
Micro-franchises are used by both the non-profit and the for-profit sectors to help alleviate poverty.
One successful example of the use of micro-franchises is the VisionSpring, formerly known as the Scojo Foundation.
VisionSpring sells eyeglass kits to men and women in Latin America, South Asia and Africa. These people become micro-franchisees, selling eyeglasses to their communities. Most of the people in the communities served by VisionSpring earn less than $4 a day, making owning a $40-60 pair of eyeglasses a near impossibility.
VisionSpring micro-franchisees, sell a pair of glasses for $4, making vision possible for community members and extending the productive life of the skilled laborers they serve.
Any students interested in how they can get involved in the micro-franchise Initiative can visit the Center for Economic Self-Reliance in Room 360 of the Tanner Building and talk to Jason Fairbourne, the micro-franchise Initiative director.
Fairbourne looks for students from all academic disciplines to help with the movement and not just business students.
“The more the merrier,” Fairbourne said.