By Jason Daley for Entrepreneur Magazine

Franchising is a powerful business model capable of efficiently delivering to the masses such varied resources as oil changes, emergency medical care, accounting services and jelly doughnuts. But could it do even more? Philanthropists are considering whether the franchise model can be used to bring vaccines, contraception, clean cooking fuel, food and other basic necessities to people in the developing world. The idea, known as social franchising or microfranchising, is beginning to catch on. After a few years of experimenting, the aid community is refining its approach and is ready to make social franchising a major plank in the way nongovernmental organizations (NGOs) assist the world's poorest regions.

The model is similar to commercial franchising, but the bottom-line goal is not pure profit--although many social franchises do aim to become self-sustaining. Rather, these organizations measure success through the number of people they feed, vaccinate or otherwise serve, and the number of franchisees provided with jobs.

In general, a social franchise, often sponsored by or spun off from an NGO or aid organization (although there are many independent social franchises), creates a network of local entrepreneurs who sell products or services door to door or from their homes. For instance, World Health Partners, a nonprofit launched in 2008 in India, recruits people in remote rural villages with limited access to healthcare. Through cell phones and portable computers, these reps connect their neighbors to a doctor in a larger city for a telemedicine session.

Other franchises offer internet connections or the use of cell phones, fortified dairy products, family-planning materials and even beekeeping supplies. Most social franchises rely on charitable donations or grants to stay in operation, but as the businesses become more sophisticated, many are hoping to reach self-sustainable levels.

Chuck Slaughter, founder of clothing and gear company TravelSmith and an entrepreneur who has helped turn around several international apparel brands, started his social franchise, Living Goods, in 2007, delivering lifesaving products to the poor by harnessing the power of the market. Using what he calls the "Avon lady" model, his crew of franchisees go door to door in villages in Uganda and Kenya, selling basic medicines, healthful foods, high-efficiency stoves, solar lights and other health and safety products.

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Based on a presentation to the annual IMESA conference “Municipal Engineering: Meeting People’s Needs”, held in Port Elizabeth, South Africa, October 2013

By Kevin Wall, Oliver Ive, Jay Bhagwan, Wayne Birkholtz, Nocawe Lupuwana and Esther Shaylor for Infrastructurene.ws

An innovative Eastern Cape infrastructure and job creation project is meeting people’s needs through quality service delivery for the community, by the community. In part one of this two-part feature, social franchising is defined and the training, expectations, services and projects of a pilot study are examined.

A number of pilot projects in the Eastern Cape have demonstrated how the institutionally innovative and very practical social franchising partnership approach can successfully be used for the routine maintenance of low-technology water and sanitation infrastructure.

Whereas other approaches have built capacity and developed skills in attempts to improve service delivery, many of them have had limited success because they have not enjoyed sufficiently strong incentive structures and support systems. The social franchising partnership approach, in contrast, is built on a robust foundation of mutual support and incentives.

This paper describes how the franchise partners have been working with municipalities and provincial departments to address operational issues at a significant scale.

Many opportunities lie in applying the approach to further operation and maintenance (O&M) activities within the water and sanitation services delivery chain, and thereafter extending it to other types of infrastructure (e.g. roads and electricity reticulation).

Background

Year after year, the O & M of water and sanitation services (hereinafter water services) infrastructure in South Africa has too often been found to be noncompliant with the required standards (SAICE, 2011; DWA, 2012a & 2012b). Research has also shown that the main problem is most likely to be shortfalls in the skills and management of the institution responsible for the services.

These operation and maintenance shortfalls are particularly manifest in “the quality and reliability of basic infrastructure serving the majority of our citizens [which] is poor and, in many places, getting worse. Urgent attention is required to stabilise and improve these” (SAICE, 2011:5).  The consequent service delivery failures are pointers of warning that serious turnaround strategies are required in South African municipal service delivery.

In 2012, the Ministerial Sanitation Task Team found that the Eastern Cape needed over 800 000 toilets to ensure all households have access to sanitation, the second highest backlog in South Africa. It was also highlighted that the lack of skills and capacity to manage existing facilities is a contributing factor for infrastructure failures. The report concluded that “there is great potential for public and private investment on sanitation that could increase both benefits and cost effectiveness of public investment” (Department of Human Settlements, 2012:70).

The Water Research Commission (WRC) has for a number of years funded studies of selected institutional options that could assist in the improvement of operation and maintenance. This research, led by the Council for Scientific and Industrial Research (CSIR) and the private sector water services provider Amanz’ abantu Services, postulated that franchising partnership models, developed in the private sector for providing a wide range of services, could be adapted. The resultant social franchising partnership concept could be a valuable and viable addition to the current range of institutional models for the O&/M of public sector sanitation and water services infrastructure (Wall, 2005; Wall, & Ive, 2010; Wall & Ive, 2013).

This research, and interest shown by public sector owners of infrastructure, prompted Amanz’ abantu, in 2008, to establish a subsidiary, Impilo Yabantu (“hygiene for people” in Xhosa), to play the role of franchisor where needed.

Whereas it was originally thought that municipalities would be the first to procure social franchising partnerships, and whereas many of the officials approached expressed interest, there was a reluctance to be the pioneer of this new and untested concept. Nonetheless, the first significant interest in utilising this innovative business approach came from key officials of the Eastern Cape provincial Department of Education (DoE), who saw its potential to assist them with one of their most intractable problems, namely the poor levels of maintenance of water and sanitation infrastructure at schools. Particularly, they saw its potential for rural schools where harvested rainwater is generally the only water supply to the school, and the toilets are usually Ventilated Improved Pit Latrines (VIPs) or similar.

In less than three years, the franchisor and its trainee franchisees greatly improved the condition of the school toilets in the Butterworth education district of the Eastern Cape.

The partnerships defined

In the words of the Franchise Association of Southern Africa , a franchise is “a grant by the franchisor to the franchisee, entitling the latter to the use of a complete business package containing all the elements necessary to establish a previously untrained person in the franchised business and enable them to operate it on an on-going basis, according to guidelines supplied, efficiently and profitably” (Parker & Illetschko, 2007:15).

Water services franchising partnerships can broadly be described as business-to-business partnerships, whereby small, locally based enterprises enter a business partnership with a larger established enterprise for the purpose of utilising a tried and tested approach to ensuring sanitation and water facilities and systems are operating in a reliable manner and in accordance with the specified availability, quality, hygiene and environmental standards.

Since the 1950s, franchising has utilised the drive of entrepreneurship while reducing many of the risks to small business (Parker & Illetschko, 2007:9). Both parties of a franchise have a stake in making sure the venture is a success while benefiting from mutual learning and shared experiences (Ahlert et al, 2008:16).

The concept of social franchising is defined as “the application of commercial franchising concepts to achieve socially beneficial ends” (Montagu, 2002) and has been identified as an approach appropriate for use in sectors where the quality of the service needs to be driven up and the cost of the service needs to be driven down through standardising on proven delivery mechanisms.

In contrast to commercial franchises such as McDonald’s, an enterprise which not only seeks to cover costs but to also make the franchisee and franchisor a significant profit, social franchising seeks to develop an enterprising solution where people from the community “contribute towards meeting their needs either with money or time (or both)” (Norton, 2010). This approach, while still needing to cover costs and allow franchisees to make a living, is also motivated towards doing social good.

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A ewe and her offspring outside a DKT facility in Pakistan were merely wandering by the family-planning clinic.

By Nancy Weingartner for Franchise Times

A couple’s method of birth control, along with the number of family members and their names are posted on the front doors of homes in Bali.

In Mozambique, posting family planning specials, such as injections, on Facebook is DKT’s Intimo clinic’s most efficient marketing tool. Its Facebook page has more than 6,600 “friends.”

Young men in Brazil are encouraged to use their GPS apps to share their condom experiences and location as part of a contest run by a local clinic.

“The U.S. is much more prudish about this subject” than the rest of the world, claims Chris Purdy, president and CEO of DKT International, a social-sector franchise that provides family planning and reproductive health products to the developing world. We’re prudish, he continues, because there’s no denying family planning was created so people can have sex without having children.

It may seem all about pleasure, but for women, controlling their fertility is a way to control their destiny, Purdy says. Fewer children mean more food on the table, more rest for the mother, more education options for her children. And in areas with limited prenatal care,  fewer pregnancies may result in healthier moms and offspring.

DKT, based in Washington, D.C., was started by libertarian Phil Harvey 20 years ago as a nonprofit to promote family planning and HIV/AIDS prevention through social marketing. Harvey began his career selling condoms through the mail, a relatively controversial practice in the ‘70s. The business evolved into Adam & Eve, a mail-order company for sex products, and some of the profits are used to fund DKT. Harvey retired from DKT at the end of 2013.

Today DKT has programs in 19 countries, which use both social media to market and a franchise framework to provide a variety of family planning services. The nonprofit was named in honor of D.K. Tyagi, India’s assistant commissioner of family planning who died of cancer in 1969, but not before he made significant inroads into India’s family planning efforts.

DKT uses all the techniques and infrastructure of commercial franchising, but doesn’t charge an upfront fee or royalties. Instead, the nonprofit makes its operating money through the products its sells clinics. Midwives are the targeted franchisees, and donor money is used to update or build clean, branded clinics where windows aren’t broken and equipment generally works.

In keeping with the franchise model, DKT provides continual training and education, as well as audits to ensure the clinics follow procedures. For instance, in Indonesia, “mystery shoppers”—or in this case, mystery customers—are employed to ensure the clinical experience is up to code, Purdy says.

Incentives for midwives to become franchisees include a clean, modern facility; ongoing education and products; and cachet in the community since the clinics are advertised on television and billboards.

The good news for family planning advocates  in developing companies is that individual incomes have risen over the years, while the cost of contraceptives has stabilized, Purdy says.

DKT offers franchisees a wide range of products, a number of which require some medical expertise to administer, such as IUDs and implants. Condoms aren’t a big part of the business because they can be purchased over the counter elsewhere. But the main draw is DKT’s ability to drive business to the clinics through large-scale advertising, something an individual clinic owner would not be able to do, Purdy adds. It’s effective because even families in the remote areas of countries like Pakistan have television reception.

Controversy sells

Not surprisingly, the social-sector franchise that provides not only preventive measures, but also abortions, can be controversial in some areas of the world. Which is why DKT works with local  governments. When Ethiopia recently legalized medical abortions, DKT was part of that change, Purdy says.

Between 70 and 80 percent of its $160 million budget comes from sales revenues of products to clinics, Purdy says.  

While conforming to the franchise’s standards, each clinic has its own personality and the services are determined by demand.

In Indonesia, for instance, injectable contraceptives are the most popular method of family planning because people there believe medicine must be injected into the blood in order to be real, Purdy says. This is a positive for the franchisee, because it means women must come back every three months for another shot, as opposed to an IUD insertion, which doesn’t require frequent return visits. Because choosing an IUD cuts down the providers’ profits, “We have to watch provider bias,” Purdy says.

Most of the visits are from women, since they’re the ones directly affected by the issue; however, Purdy says the occasional man will show up for an appointment with his wife, especially if she’s considering an IUD.

Since it’s a foreign object inserted into a woman’s uterus, the man “might be worried it will affect him,” Purdy says.

Marketing condoms can be a touchy subject for government censors, as well. “When you talk about condoms, (men) don’t want to hear about HIV, they want to hear about the benefits,” Purdy explains. “So we talk about pleasure.”

In Pakistan a suggestive ad for Josh Condoms, starring a controversial actress, who talks openly about sex on a late-night television show, was banned by the government. Which, of course, led to the ad, which depicted an average-looking guy marrying a supermodel because he used Josh Condoms, to be a downloadable success on YouTube. DKT was proud it hit a nerve. “It sparked a huge debate about why can’t we talk about condom use,” Purdy says. “We’re happy with the results even though the ad pulled.” (In 2013, DKT sold 538 million condoms worldwide.)

Combining social-sector franchising with social media has enabled the brand to grow throughout the developing world, attracting donors such as the Bill and Melinda Gates Foundation, the United Nations Population Fund and USAID. The brand grows, the families don’t—or if they do, it’s responsibly.

 

DKT’s CEO Christopher Purdy served as country director for programs in Ethiopia, Indonesia and Turkey before returning to the U.S. to work at the social-sector franchise’s headquarters.