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FIP 51: Social Franchising Series 4/4 Franchising in Nairobi with CJ Bak

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Christopher Bak, also known as CJ, is Co-founder of Liberty Eagle African Holdings, owner of several commercial franchises operating in Kenya. CJ and his co-founder joined forces to use their collective knowledge of retail, finance and emerging markets in Asia and Africa, to launch multiple consumer-facing retail operations that are attached to notorious Western brands. Today’s episode isn’t about the brands that CJ and his co-founder brought to the market, but rather diving into some of the who’s and how’s of their experience.

In today’s episode, you’ll learn more about:

  • CJ’s experience in Africa prior to becoming a franchisee and how that shaped his understanding of the existing market opportunity.
  • How CJ met his co-founder, and the complementarities between their professional skills and experiences in different regional markets.
  • The origin story behind their early franchises and how they grew from the Tanzanian to the Kenyan market.
  • Comparing different types of international franchises, including how they differ based on their region of origin, growth strategy, and public versus private ownership. We also gain some insight into the effect of franchisors having regional offices and whether that has been to the benefit of franchisees or not.
  • CJ differentiates between a brand that is ready for a market versus when a market is ready for that brand, using evidence from supply chain, regulatory and retail price perspectives.
  • The particular challenge for food service franchises to access inputs whose quality standards are high enough for the brand and affordable enough for the franchisee to earn a margin and not price themselves out of the market.
  • The downside: when brands need to close their franchises due to non-conformity among franchisees, and why that might happen.
  • Why the Kenyan market has experienced significant growth in franchises owned by non-natives, and what local entrepreneurs would need to get in the game.

Connect with CJ:

Ben Litalien Finding Impact

FIP 50: Social Franchising Series 3/4: What Everyone’s getting Wrong about Social Franchising, with Ben Litalien

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We’re going deep into the commercial side of franchising in this episode with Ben Litalien, seasoned franchise expert in the commercial world, having taught at Georgetown on franchising for close to 12 years, started his own franchise consulting firm called FranchiseWell, with clients such as IKEA, Snap-on Tools, Subway, Direct Energy, and The UPS Store. He did his doctorate on social franchise so it’s great to get his perspective from a long commercial experience now applied to the social sector.

On this episode, you’ll learn:

  • Why it’s important to learn franchising by studying how to use the franchising model, not by studying others’ model that uses franchising elements, since you only get part of the full franchise model.
  • Instead reverse engineer the architecture needed to achieve the desired goals. For many entrepreneurs, its reduced monitoring costs. It’s having a predictable result without having to be there beside the franchisee everyday.
  • One of the biggest failures of franchises, both in commercial and social franchising models, is HR – they bring on franchisees who don’t know how to hire, manage and fire employees.
  • A second big point of failure is they sell franchises to people who don’t have a good sphere of influence within the territory they’re operating in.
  • About architecture of the franchise structure, such as development agents that might take a territory who sell franchises to individuals.
  • Demand for a product isn’t enough for it to be franchisable. There needs to be sufficient profit so royalties can flow up to sustain the franchise structure.
  • Whether charging royalties is a must-have for social franchises and whether it can be avoided.
  • How to keep the relationship “sticky”, between franchisee and franchisor, so they keep paying royalties, including how to protect the value of the brand.
  • This includes how the franchisor creates an expectation about what the customer receives, so it’s an absolute must to be able to remotely enforce those standards.
  • How the right economic model is different for each country, which needs to be grounded in the economics of that country and the operating conditions imposed by the government.
  • What a potential franchisee should be looking at when assessing whether investing in a franchise is right for them.

Links to resources:

Connect with Ben:

What was your favourite lesson from this episode? Share it with the social enterprise community on Twitter by clicking here!

FIP 49: Social Franchising Series 2/4: Social Micro-franchising with Beth Meadows

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Beth Meadows is a psychologist turned entrepreneur. She built a travel franchise that grew  to over 250 locations in just 5 years, which was purchased by an American Express affiliate before the age of the internet. She’s still in the travel business, as part of the internet of things, but she has turned her focus to using her commercial successes and failures to help the BOP. Beth is passionate about the franchise model, and specifically micro-franchising at the BOP, because it provides opportunities for entrepreneurial, hard-working people, regardless of their wealth status, to earn meaningful incomes and live dignified lives.

In today’s episode, we learn several lessons from Beth, including:

  • How she started Mercado Fresco, her franchise in Nicaragua, including the research and inspiration behind the concept, starting with the insight that 80% of the income of those living under $2/day was allocated to food purchases.
  • The importance of knowing your market and customer, and why that foundation is necessary before building your social business.
  • A dive into their early-stage set-up, including their social mission, product mix, business case, quality control oversight, and the number of locations at launch.
  • Early-stage risks and how they were mitigated by taking time to know the customer base, product testing, and maintaining close and constant communication with franchisees.
  • How continuous feedback loops between the franchisor and franchisee were established early-on, and what types of information was exchanged and collected.
  • How they standardized among franchisees and what it took to monitor compliance, as well as when and how standards were designed.
  • The uniqueness of branding and franchising at the BOP in their community, and how Mercado Fresco markets itself.
  • Franchisee screening and onboarding: what the process entails, who is deemed a good fit, and what types of training is involved.
  • Mercado Fresco’s consignment model, which was designed for franchisees who have low educational attainment and little access to capital. We learn the approximate investment capital required for each franchisee to open and how that effects franchisor cash flow.
  • Growing to 100 stores in a few years, we learn how their franchise business has changed and what milestones they have reached with respect to how this reduces their business challenges.
  • Key indicators for you to consider whether your social enterprise may be poised for franchising: namely the existence of established, detailed, documented processes; and good legal advice and contract arrangements between franchisor and franchisee.
  • What’s next for Mercado Fresco: a new micro-consignment model that provides daycare and shorter work days for women who cannot operate home-based brick-and-mortars.
  • What Mercado Fresco’s advisory and consultant ecosystem looks like, from commercial franchising professionals with the likes of Subway and Chic-fil-a, to academic institutions and MBA students.

Resources

Connect to Beth

What was your favourite lesson from this episode? Let me know on Twitter by clicking here!

FIP 48: Social Franchising Series 1/4: Social Franchising 101 with Bill Maddocks

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Bill Maddocks is University of New Hampshire’s Director of Social Sector Franchise Initiative, Director of Sustainable Microfinance and Development Program and Community and Economic Development Advisor for UNH Cooperative Extension. Bill has been involved in the economic justice movement for 3 decades, and for 7 years he led the Microenterprise and Development Institute at the School of Community Economic Development at Southern New Hampshire University, which had a training program in Africa and the United States.

Kicking off our 3-part series on Social Franchising, Bill takes us through “Social Franchising 101” where he sets the landscape for us to dive deeper in the following two podcasts. On this episode we discuss:

  • How to define social franchise, which is similar to a commercial franchise, but differentiates itself by providing goods or services that improve social outcomes.
  • Core components of a commercial franchise that provides the bedrock for social franchising, namely operational systems, a defined brand, and franchisee ownership over their franchise.
  • A brief overview of the challenges posed by building a franchise model in emerging markets compared to established markets ones by highlighting institutional and market differences.
  • The social franchise entry-point: microfranchising and microconsignment. These models require less up-front investment than a full franchise, offer more procedural flexibility, and minimal ownership stake.
  • How social franchising is on the rise among revenue-generating social enterprises as a replication model and in particular, an attempt to shift from subsidized, charity-based structures to profitable social businesses.
  • How to assess your social enterprise’s readiness for social franchising and whether it is the appropriate replication model for you based on established procedures and brand development, market fitness, pricing, and your internal capacity to share knowledge and train others. We hear about a Malawian agro-veterinarian retail business and its journey through franchising.
  • When to start planning to replicate using the franchising model. Hint: early birds get the worm!
  • Alternative replication models, including licensing and joint ventures, and how they are similar and different from franchising.
  • Insights into UNH’s social franchising accelerator program, where the public can learn from the 7 month journey of 5 social enterprises as they confront and overcome the challenges of building their social franchises.

Resources

Connect to Bill

What was your favourite lesson from this episode? Let me know on Twitter by clicking here!

FIP042: Franchising Social Enterprise with Randy Welsch

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This week we learn how the franchise model has made its way to social entrepreneurs in the form of a clean water company, Jibu, with Randy Welsch, Jibu’s Co-founder. Decades of entrepreneurship and investment in small enterprises led Randy to partner with his son to launch a bottled water franchise – a far cry from the world of software and satellite technology, where Randy concentrated most of his professional career.

This podcast will shed light on how the franchise model is working for Jibu, and we’ll learn more about:

  • The origin story behind Jibu, a father-son social enterprise that delivers clean water to bottom-of-the-pyramid consumers in Africa by iterating on the franchise model. Randy touches on pre-Jibu learnings during his consultancy with WorldVision, in addition to the small, private investments he made, that proved critical to Jibu’s launch.
  • How externally-led interventions fail communities and why local ownership is a game-changing approach to tackling poverty.
  • Why you might want to ignore the nay-sayers and confront prejudice against people in emerging markets, which are all-too-common attitudes among “experts” and expatriates working and living in BOP markets.
  • The importance of failure, why franchisees need to be bought-in to this mindset, and why Randy and his son started with a “20 ways to fail” list, which rose above 300, but never stopped them.
  • How Jibu built strategies for identifying local entrepreneurs that fit with the franchise model.
  • The specifics of Jibu’s franchise model from the perspective of the franchisee, from the contents of a Jibu store to territory management and how they build a franchisee pipeline.
  • The difference in attitude, energy and creativity between being an employee and a business owner.
  • How franchising builds collaboration and community rather than competition.
  • The structure of Jibu’s franchise model, including the responsibilities of the franchisor and the franchisee, and how the model may change as the company prepares for new country expansion.

Links to resources

Connect to Randy:

What was your favourite lesson from this episode? Let me know on Twitter by clicking here!