Leveraging the Power of Markets with Microfranchising

There has been growing interest lately in the use of market-based solutions to help alleviate poverty across the globe, especially as a result of the successes of the Acumen Fund.  Although these kinds of solutions are no panacea, they have opened many opportunities for poverty relief and economic self reliance development that previous approaches (such as regulatory or simple charity) have not been able to accomplish.  Market-based approaches have the ability to provide opportunities, change mind-sets, and build economies.

Problems that Market-Based Solutions Can Fix

Take, for an example, the scenario of small rural farmers trying to eke out a living by selling their crops.  The problem for these farmers, in many instances, is not that they don’t work hard enough or that they don’t have something valuable to offer people – it’s simply that they do not have access or control to the necessary markets to get a deserved and fair return on their products.

The reasons for not having access to the necessary markets in this case can be caused by many different factors, of which only three are listed below:

1. They don’t have a sufficient knowledge of market opportunities or how to take advantage of these market opportunities.

2. They are forced to sell at a lower price because of larger farms owned by the wealthy that dominate the market.

3. They don’t have the capital necessary to invest in a technology that would allow them to make their product more valuable and more marketable.

Finding market-based solutions to help those in poverty overcome these challenges and gain access to markets where they can participate in a fair value exchange for their goods and services is critical if poverty is to be eradicated and those suffering under its constraints are to be placed in a position where they can provide for their families and create sustainable business and value.

Microfranchising as a Market-Based Solution

A microfranchise has the ability to overcome these boundaries and allow those locked in poverty to make the market work for them.  When you use a microfranchising model, you are leveraging a proven process that works for a given market – it’s already been tried and tested.  The market research, the product development, and the process refining for delivering that product to the market have all been thought through.  All of this thought and leg work, done by someone in a position to understand the markets and take advantage of the opportunities, can now be handed to the microfranchisee to use.  This overcomes the problem of insufficient knowledge of the market.

A microfranchise also allows smaller businesses to have more sway in a given market because of the ability to leverage a brand.  Each microfranchisee inherits the brand reputation of the franchise, gaining more notoriety and power in a given market.  Markets are composed of inherently risk-averse buyers; having a trusted brand name behind the microfranchisee’s products and services increases his/her ability to sell.

The microfranchising model also allows a microfranchisee to have access to transformative technology, so they can reach markets previously unattainable.  Because the microfranchiser has access to the needed capital, they are able to provide the technology to the microfranchisee to use in running the business.  Take the above example of the farmers; what if they had access to simple piece of technology that would allow them to can some of their crops, extending their economic shelf life and allowing them to be shipped further distances?  This opens the door to new markets they can sell too.

The use of the microfranchising model leverages the power of markets to provide much-needed opportunities for those in poverty to progress and gain a fair chance at sustainable business.