Re-imagining international development the way Steve Jobs re-imagined technology
Steve Jobs is celebrated for pushing boundaries - the boundaries of societal norms and the boundaries of individuals willing to put principles over personalities and persevere through uncertainty and/or adversity - in order to achieve something larger and more important than self-fulfillment. His vision involved the merging of previously separate disciplines - technology and the humanities - to create something altogether new.
Something different. Something better.
In recent years, the international development space is experiencing a similar merging of disciplines - commercial business with social services - to address some of the still-unsolved problems that plague society today. While there are an increasing number of social enterprises meeting social needs, most are operating at a scale far too small to make a meaningful dent in global problems.
The international development community is making important strides toward supporting the growth of successful social businesses through the establishment of “incubators” that support businesses in the early startup phase; and “accelerators” that address organizational, operational, and strategic barriers to growth at later stages. Indeed, a recent Forbes article counted some 3500 social business incubators and/or accelerators designed to support the growth of social businesses. Both incubators and accelerators are important resources that can help firms grow into well-established organizations that contribute to local economies and deliver social impact to the communities they serve. There remain questions, however, about how well they workand whether these efforts are really enough.
Is a successfully “incubated” and “accelerated” small or medium social enterprise enough?
This article suggests that when global development is the goal, it is not enough to settle for successfully operating small or medium enterprises; and that the development community should also invest in strategies that can help those proven social businesses further expand through models such as franchising, particularly “business format franchising”, that have proven themselves in the commercial sector.
In this way, social businesses can scale in the same way that commercial businesses have scaled thus resulting in a) more wealth creation for the local business owners; b) more jobs for people in communities where businesses are located; c) more social impact in more communities that are served by these local social businesses; and d) higher, consistent, and sustainable quality standards across a range of industries based on the requirements of larger branded enterprises.
This approach should also be interesting to those primarily concerned with promoting economic development in low-income communities. Franchising of any type of business, social or not, has the power to transform economies because it both directly and indirectly creates business ownership and jobs in the communities those businesses serve, thus building a middle class. Franchising is one of the fastest growing segments of the global economy. Thousands of franchisors and millions of franchised businesses create millions of jobs globally. In addition, its economic output represents a significant share of national GDPs, on average just over 4%. Studies show that in the US alone, 780,000 franchise establishments across 295 industries support nearly 9 million direct jobs and $890 billion of economic output for the economy. On average, one in four franchises in any given country outside of the US are foreign-based. This suggests that consumers are open to foreign products and that there is great potential for export of domestically developed concepts regionally and globally.
What makes franchising such a promising model for the international development community?
Franchising works on many levels to drive economic development and social progress. A recent investigation of franchising’s role in economic development concluded that franchising drives economic development in four key ways, the first of which is efficiency. Franchising generates efficiencies in markets by establishing systems (both internal and external to the franchise business) and know-how (e.g., business and management skills) that are proven in the global marketplace. Second, franchising stimulates competition, which in turn leads to higher quality products and services, lower costs, and more market segmentation that enables a greater portion of society to access the market. Third, the effects of franchising on customer service and product quality improve consumer welfare even if the service being franchised is not a “social” business. For example, in the restaurant industry franchising can raise standards of food products through sourcing, preparation, and hygiene requirements. There is also a built in process for educating consumers and further driving demand for higher quality products and services. Fourth, franchising provides opportunities for business ownership, which is widely regarded as an important means to achieving economic growth. It is also a powerful vehicle for imparting knowledge and skills that entrepreneurs need to succeed in business, which has a positive spillover effect on quality and quantity of locally -owned businesses beyond franchises.
Franchising can further contribute to a country’s economic development by facilitating its ability to develop exportable goods and services - i.e., home-grown franchises that have regional or global appeal. Many think of franchising as the export of US culture and that its sum effect is more destructive to local culture than it is helpful to the local economy. In fact, that trend is changing, and more franchises every year are home-grown and even being exported to the US; 5% of franchise brands in the US are imported. South Korea is the second largest developer (behind the US with 3,636 domestic brands) of franchise brands with 2,584 locally developed franchises. Other countries leading the way in domestic franchise development are Taiwan (2,141 domestic brands), France (1,547 domestic brands), Mexico (1,120 domestic brands), Australia (998 domestic brands), and Philippines (975 domestic brands).
In sum, franchising works so well in so many diverse cultures because it is adaptable, scalable, and has proven to be sustainable over long periods of time. Franchising is highly effective at transferring entrepreneurial skills and best practices around the world because of its adaptability to differing cultures and economic requirements. Because of its focus on and enforcement of brand standards, franchising has created secondary benefits in establishing supply chains and by bringing best practices in business to new economies with the resulting effect of improving living standards across the globe.
How does franchising facilitate business expansion?Franchising is a powerful growth strategy that has proven itself as one of the most effective ways for a brand to achieve global coverage. Franchising solves multiple barriers to business expansion for entrepreneurs. For example, it provides a mechanism for them to access three critical types of capital needed to successfully expand: 1) financial; 2) managerial, and 3) local market insight. The franchisor uses the franchisees’ funds to open new locations, the franchisees’ people to manage the site, and the franchisees’ knowledge of local markets to identify site locations, secure local suppliers, and continually adapt to evolving market conditions. In the social sector, social franchisors leverage resources from the philanthropic community to provide the local funding necessary for the local entrepreneur to invest in their franchised businesses.
Franchising also solves barriers that many local entrepreneurs face to starting a business of their own. First, it offers benefits of a proven business model and rights to use the procedures and systems that make it so successful. This spares the new entrepreneur time, money, and risk involved when trying to create a successful business concept from the ground up. Second, it offers benefits of a shared brand across multiple locations delivering a consistent customer experience. It also provides a way to rigorously measure output and results at the local level so that the business can be effectively managed. Both of these features make it easier for the entrepreneur to attract and maintain a strong customer base from inception of the business, and enable them to become cash-positive much more quickly than if they were to start their own business with their own brand. Third, it enables them to leverage the power of a large network (purchasing, lobbying, etc.) and therefore get access to things like advertising and supply chains that might otherwise be cost-prohibitive. 
How can franchising change the development landscape?Imagine if added to the list of franchise opportunities being marketed to prospective franchisees (via websites such as franchiseexpo.com or events like the International Franchise Expo) were social business franchises such as Jibu’s water franchise, CFW’s healthcare franchise, One Family Health’s healthcare franchise, SolarSister’s clean energy franchise, Farm Shop’s agro-business franchise, and so on. Then imagine these opportunities being marketed to prospects in the communities that need the services. So, for example, a local entrepreneur in Kenya might be interested in purchasing the Jibu water franchise to operate in her community because she sees tremendous business potential. She may also see it as a way to provide a social benefit to her community. She can get a loan from the bank or start-up capital from investors because they have confidence in the Jibu business model and perceive it as a low-risk investment.
In this way local entrepreneurs, instead of (or in addition to) international NGOs, would take on the role of owning and operating businesses that solve needs in their communities while at the same time creating wealth and jobs that lift those communities out of poverty. This is where the re-imagining happens, and the new and better way of doing international development begins to take form.
How do we make this happen faster?Demonstrating that expansion models like franchising can work in the social sector the same way they work in the commercial sector will lead to the transformative change we are all seeking in international development. We can’t demonstrate it until we try it, try it correctly, and try it a lot. This will require industries that are very different in many ways to come together to share ideas and teach new skills, and ultimately revolutionize our collective thinking and approach to solving social problems in emerging market economies, both domestically and overseas. It is not easy to do this, but if we decide that it is important and make our own personal needs (e.g., for recognition and reward) secondary to our common mission to create a world where more people can live healthy and productive lives, then we can do it.
We have all of the components needed to create this - proven social businesses, local entrepreneurs looking for business opportunities, franchising know-how, existing funds (that would simply need to be diverted from less promising projects or approaches), and plenty of market potential. We just need to connect them more efficiently and effectively. When we do, the resulting effect will be transformative on many levels.
To learn more, please contact Julie McBride (email@example.com) who is leading the effort at MSA Worldwide in partnership with the International Franchise Association’s Social Sector Task Force to identify and connect players in this space - including funders looking for good social investment opportunities, existing social franchisors looking to improve and/or expand to new markets, existing social businesses interested in franchising their concept, and providers of technical assistance and/or products (i.e. franchise management systems, mobile health technology, new diagnostic tools, etc.) that might be helpful to franchisors.
 Acharya, Nish ; “The Results of the First Ever Study of Accelerator Best Practices”; Forbes.com; October 21, 2015
 International Franchise Association (IFA); Franchise Business Outlook; Franchise Economy.com; January 2014
 World Franchise Council Survey on the Global Economic Impact of Franchising; 2015
 Steven C. Michael; “Can franchising be an economic development strategy? An empirical investigation”; Small Bus Econ; 42:611–620; 2014
 World Franchise Council Survey on the Global Economic Impact of Franchising; 2015
Franchising is a proven business model for scaling the distribution of products and services while maintaining consistent standards and achieving economies of scale. In recent years, the model has been applied to the social sector with the goal of increasing access to quality products and services that people need to live healthy and productive lives. Franchising in the social sector is gaining traction because of its potential to transform lives of people in need both domestically and overseas. This webinar introduces this growing field through a discussion with two of its most prominent proponents, Julie McBride of MSA Worldwide and Scott Hillstrom of The Healthstore Foundation.
Thursday, October 15, 2015
10:00 a.m. EDT
Webinar Guest Presenters:
Scott Hillstrom, Healthstore Foundation
Julie McBride, MSA Worldwide.
Franchising is a proven business model for scaling the distribution of products and services while maintaining consistent standards and achieving economies of scale. In recent years, the model has been applied to the social sector with the goal of increasing access to quality products and services that people need to live healthy and productive lives. Franchising in the social sector is gaining traction because of its potential to transform lives of people in need both domestically and overseas. Our October webinar will introduce this growing field through a discussion with two of its most prominent proponents.
The promise of social franchising to deliver sustainable solutions to society’s social needs is grounded in the fundamental principles that have made franchising such a successful replication model in the commercial sector. Unfortunately, most social franchise implementers are not familiar enough with those principles to optimize franchising’s potential. This article is intended to shed light on the key conditions that all implementers should be aware of when designing or striving to improve a social franchise.
It will also be useful for funders of social franchisors to be aware of these conditions so that their investments are supporting best practices and driving the field of social franchising toward a more impactful and sustainable future.
Conditions Required for a Social Franchise to SucceedSocial franchising will deliver results, just like commercial franchising delivers results, when certain conditions are in place. These are:
When all of these conditions are in place, it is safe to conclude that the concept is franchisable.
The next step would then be to design the franchise.
Elements of Good Social Franchise Design
Once the groundwork for success is laid by creating the conditions described above, the franchise can be designed. Following are some key elements of all good franchise designs that should be addressed when designing or strengthening a social franchise system.
ConclusionImplementers and funders of social franchising will dramatically improve their bottom lines when they understand the fundamentals of franchising discussed in this article. There are experts in the field of franchising that can help with both design and execution of social franchises in the same way that they help commercial businesses. The International Franchise Association’s Social Sector Task Force has established a mentor program, and consulting firms like MSA Worldwide offer highly specialized technical support in social franchising. Whether a social business considering expansion through franchising, or an NGO that has been operating a franchise and is looking to improve its performance, there are resources available to help implementers make smart design decisions that will enable them to achieve social and financial goals. In the end, while many parties benefit from a well-designed social franchise, those who stand to benefit most are the people in need of the products and services being franchised. It behooves us all to make the effort to learn from each other so that we can better serve those in need and make this world a better place.
 Seid, Michael and Thomas, Dave; Franchising for Dummies, 2nd Edition, Wiley Publishing, Inc., 2010.
Differentiating commercial, micro, social, and hybrid franchise models
By Julie McBride, Senior Consultant Social Franchising, MSA Worldwide
Getting on the same page
Put simply, franchising is a method of replicating a proven business. Franchising has two main forms. In Product/Trade Name Franchising (Traditional Franchising), a franchisor owns the right to a name or trademark, licenses the right to use that name or trademark, and generally provides the franchisee with a product that needs pre- and post-sales service.
Business Format Franchising involves a more complex relationship in which the franchisor provides franchisees with a full range of services and support, and the franchisee operates according to the franchisor’s standards in delivering the branded products or services to consumers.
While Traditional Franchising is larger is total sales, Business Format Franchising has become one the most widely used methods for expanding the distribution of proven business concepts (Alon, 2014). There are now hundreds of industries using franchising to distribute products and services including restaurants, hotels, cleaning services, fitness centers, assisted living, and home health care.
According to the IFA, franchising is growing rapidly overseas with more than 400 U.S. franchise systems operating internationally. There is also an emergence of marginalized segments of society, particularly women and minorities, operating franchise businesses. Franchising is a desirable growth strategy to the concept owner because it allows them to grow at a high rate while maintaining brand standards. It also reduces the amount of growth capital that the franchisor must raise. Franchisees benefit from gaining access to proven concepts and business systems, and because most franchisors offer ongoing training and support and in some cases financing assistance, franchising provides a way to overcome the most common obstacles to starting a business - lack of business experience, and insufficient start up capital (Harrington, 2013).
Franchising has taken many forms over the years as it has adapted and evolved to meet changing market needs. Social and micro franchising are the latest concepts in franchising, and interest in using them to deliver benefits to underserved communities in both developed and developing economies is gaining momentum (Alon, 2014).
The purpose of this article is to provoke discussion around ways in which the social and micro franchising communities of practice can organize and compare information and ideas so that the field of practice can advance more rapidly. This article will be followed by a series of case studies that highlight lessons learned about the different types of models, and circumstances where each would be appropriately adapted.
Overcoming a critical obstacle to progress
As new model variations emerge, there is a need to understand their effectiveness and applicability to different contexts so that they can be replicated appropriately. However, the field of social franchising is growing so haphazardly that it is challenging to capture best practices and lessons learned, let alone use them to advance the field. It is therefore difficult for stakeholders to make informed decisions about franchise design and investment. The result is that funding is not always channeled to effectively designed franchise systems.
When poorly designed and/or executed franchises are assessed and compared without understanding how they are fundamentally flawed or different from each other, erroneous conclusions are drawn about the effectiveness of franchising as a business model (as opposed to the effectiveness of the organization attempting to use the business model). As a result, funds for social franchising in general could be reduced or discontinued and end up unnecessarily shortening the lifespan of a model that has tremendous potential to improve people’s lives.
The first step to solving the challenges ahead is not as sexy as the title of this article suggests. It is simply a matter of defining, identifying, and differentiating between the various “shades,” or variations, of franchising. Once that is done, a social and micro franchise community of practice can work more productively together using a common understanding and language around franchising.
Looking a little closer: variations of franchise models
Box 1: Definitions of Commonly Used Franchise Models
Franchise: A relationship, as defined by the FTC and various states, which typically includes three basic elements: (1) the granting of the right to use the systems mark, (2) substantial assistance or control provided by the franchisor to the franchisee, (3) the payment of a fee (in excess of $500) during a period of time six months before or six months following the commencement of the relationship (Seid, 2015).
Traditional Franchise (aka “Product and Trade Name Franchise”): The licensing of a franchisee/dealer to sell or distribute a specific product using the franchisor’s trademark, trade name and logo. (Automobile dealerships, Truck dealerships, Farm equipment, Mobile homes, Gasoline service stations, Automobile accessories, Soda, Beer, Bottling are types of traditional franchising. In traditional franchising the franchisee generally is required to provide presale or post-sale services of the franchisor’s products. Describes the specific product or service associated with the delivery, not the system of delivery as in Business Format Franchising.) (Seid, 2015).
Fractional Franchise: The products or services being franchised are housed within an existing business and contribute to only a portion of overall revenues.
Business Format Franchising (BFF): A franchise occurs when a business (the franchisor) licenses its trade name (the brand) and its operating methods (its system of doing business) to a person or group (the franchisee) that agrees to operate according to the terms of a contract (the franchise agreement). The franchisor provides the franchisee with support and, in some cases, exercises some control over the way the franchisee operates under the brand. In exchange, the franchisee usually pays the franchisor an initial fee (called a franchise fee) and a continuing fee (known as a royalty) for the use of the trade name and operating methods. BFF describes the system of delivery, not the specific product or service associated with the delivery as in Product or Trademark Franchising (Seid, 2015).
Social Franchise: The application of commercial franchising methods and concepts to achieve socially beneficial ends” (International Franchise Association’s Social Sector Task Force, 2014). Social Franchising is used to increase access to products and services across a range of socially oriented industries (e.g., education, health, agriculture, water, sanitation, clean energy), with its target market being underserved populations in low, medium, and high-income countries around the globe (MSA Worldwide).
Micro Franchise: A small business whose start up costs are minimal and whose concepts and operations are easily replicated (Fairbourne et. al, 2006). Micro franchising is used to increase access to business opportunities that enable people to lift themselves out of poverty. Its primary purpose is economic development and unlike social franchising, it is not necessary that the business being franchised meet consumer social needs (MSA Worldwide).
Hybrid Social/Micro Franchise: A micro franchise of a business that delivers social benefits to consumers.
What all of these models have in common is that they offer franchisees a brand and products that represent value to the consumer. Fractional and business-format models offer services in addition to products. Because service delivery relies on human behavior, maintaining standards across the network for these models requires more inputs such as training and ongoing support from the franchisor.
A rigorous compliance system is also required to maintain control over the brand. As the franchise becomes more central to the franchisee’s business success, the franchisor will have more control over franchisee quality and consumer brand perception. This is because franchisees value the franchise offering enough to deter them from behaving in ways that would risk losing franchise rights.
Fractional franchises, where only a portion of the franchisee’s business is dependent upon support from the franchisor, are more difficult to control and require much greater effort on the part of the franchisor to maintain service standards. Further, it is doubtful in a social franchise that the franchisor will be able to recover a significant portion of operating costs through franchisee fees or royalties and thus achieve sustainability when the financial value-add to the business is small or even unmeasurable, as is the case with most fractional social franchises. While these are significant potential pitfalls of fractional franchising, the model does meet the needs of social franchisors in terms of reducing the amount of start up capital required - since the model is adding to existing businesses rather than creating new ones (Alon, 2014).
Figure 1, below, provides a high-level overview of each model’s features and the complexity of the franchisor/franchisee relationship in terms of their roles and responsibilities to each other. Knowing the differences will help stakeholders understand why different models out-perform each other in different ways, and help them select models that are suited to achieving their goals.
Figure 1. Defining and Differentiating Features of Common Franchise Models
The devil is in the details
Posts on our blog are contributed by a team of professionals dedicated to developing valuable resources for the Social Sector Franchising community.