What is Microfranchising?
We broadly define microfranchises as small businesses that can be easily replicated by following proven marketing and operational concepts. The overall objective of microfranchising is to promote economic progress by creating sound business models that can be replicated by entrepreneurs at the base of the pyramid. This allows the start-up costs of microfranchises to be minimal. The key principle is replication: replicating success to scale.
Microfranchising is an economic development tool formally researched and tested at the Ballard Center. Microfranchises provide sound business opportunities and services to the poor by introducing scaled-down business concepts found in successful franchise organizations. Faculty and students at the Marriott School have been involved in researching and participating in microcredit, microfinance, and microenterprise development activities for more than ten years. Our perspectives on microfranchising are often seen through that lens.
Why is Microfranchising Needed?
It is well known that there are a lack of employment opportunities in developing countries, leaving 3 billion people—nearly one half of the world’s population—in acute poverty (living on less than $2 a day). As a result, many people have no choice but to start microenterprises in order to survive. The International Labor Organization’s 2002 report indicates that 72 percent of sub-Saharan Africa’s population operates within the informal sector, eking out a hand-to-mouth survival. About 51 percent of people in Latin America and 65 percent of people in Asia operate within the informal economy. Furthermore, many of the small businesses operated by people in developing countries fail or exist on subsistence levels, leaving hundreds of millions in poverty. Microfranchising is a new tool designed specifically to assist these entrepreneurs to become more successful and reach economic self-reliance through the provision of successful business models with the necessary initial and ongoing training needed to succeed.