Besides its secret Big Mac sauce and crispy chicken nuggets, McDonald’s is well-known for its franchising model. In its early years, legendary business leader Ray Kroc became frustrated that McDonald’s wasn’t expanding quickly or efficiently enough. He paved the way for McDonald’s to become what it is today by applying Henry Ford’s assembly line concepts and duplicating restaurants around the world.
In a recent blog post, I highlighted how community health workers are playing an important role in delivering health services to people in developing countries. In this post, I’ll highlight how franchising models are being used by innovative health organizations in developing countries to improve the reach and quality of health services and products.
Distribution Challenges
Many global health challenges today are rooted in access and distribution. Sub-Saharan African countries’ health systems generally function poorly and are characterized by health workforce shortages, management incompetence, inadequate infrastructure and health care financing shortfalls. Similar challenges are found in developing countries across other regions.
Given the low capacity of health systems in these contexts, the challenge of last-mile distribution for health services and products is particularly acute. Accordingly, there is a need to scale models that are meeting the challenge of delivering health-related services and products to remote areas efficiently and cost-effectively.
An article by Marc Epstein and Eric Bing, Delivering Health Care to the Global Poor: Solving the Accessibility Problem, highlights microclinic and micropharmacy franchises as two alternative distribution channels to traditional models of health service delivery.
Microclinic and micropharmacy franchises – what are they?
Microclinic and micropharmacy franchises – what are they?
Microclinic franchises are small health clinics, typically in rural areas, that provide basic medical care for common and preventable diseases. Run by formally trained providers like community health nurses and doctors who can provide high quality basic care, they're an important channel for bringing diagnoses and treatment to remote areas.
These facilities typically rely on a direct referral system for patients with more complex or rare conditions. Some microclinics also contain micropharmacies that distribute medication. Franchisees will typically pay a yearly fee to use the brand name and receive logistical support. So far, these systems have been successful in Kenya, India and across West Africa.
CFW shops, operated by the HealthStore Foundation, are an example of franchised microclinics in Kenya. They provide treatments for medical conditions that cause 70 to 90% of child morbidity and mortality in developing countries, including malaria, diarrhea and worms. The franchises are typically owned by nurses, and these shops provide, on average, over $1,000 per month in income for the franchisees. Franchisees receive extensive training on CFWshops standards and procedures.
Micropharmacy franchises are small-scale pharmacies that are typically located in rural, remote areas. They help to ensure that essential medicines are delivered to these underserved people. The franchisors ensure that the medicines they supply are of high quality and they provide franchisees with training in essential medications and treatments relevant to their local communities.
The inside of a typical village pharmacy supported by Mercy Corps' Sustainable Community Health Stores program, with various health products and medications stocked on the shelves.
What’s in a brand name?
When you eat at Subway or McDonald’s, you know what to expect. There may be small differences across different locations, but you usually know your options, what the quality of the service will be and what prices you will pay.
But why is it important that healthcare franchises operate under a single brand name? In developing countries, healthcare services and the quality of medicines vary drastically. According to the Center for Medicine in the Public Interest, around 30% of brand-name drug sales in developing countries are counterfeit.
Drug “stock-outs” -- when stocks of drugs and supplies run out -- are also common in pharmacies in developing countries. For conditions like HIV/AIDS and tuberculosis, this increases the risk of drug resistance, treatment failure and death. Furthermore, given the varying quality of health services, it may be difficult for patients to trust doctors’ diagnoses and treatments at some local health clinics.
By strictly regulating the quality of services and products across all of their locations, healthcare franchises provide a brand name that consumers can consistently put their trust in. Consumers can know what to expect from these microclinics and micropharmacies.
Why franchising?
Franchising provides an effective system for scaling quickly by placing the onus of expansion on outside entrepreneurial individuals. Furthermore, franchising also provides an incentive structure for high quality health care. Franchisees are driven by the incentive of ownership, so they have an interest in making the pharmacies or clinics successful.
Patients are seeking high quality, reliable health care at affordable prices, so franchisees will be driven to meet these needs. Furthermore, the franchisor -- the parent company -- has an interest in strictly enforcing compliance to franchise standards to protect their brand name. They seek to ensure that all franchisees are consistent in the type and quality of care they provide to inspire the trust of consumers.
Many of these franchises operate under a hub and spoke model, where the microclinics and micropharmacies are connected to a regional office or hospital. For the micropharmacies, the regional offices maintain the stock of each outlet to ensure that there are consistent streams of medicines supplied at an affordable bulk price.
For microclinics, the hub and spoke model ensures that the staff of the clinics is vetted consistently according to set standards, there is a quality control mechanism and a direct referral system to a larger hospital. The hub and spoke model can be highly effective as long as the hubs are operating efficiently and ensuring that all of the spokes are getting the services they need.
The Financing Aspect
Even if there are nurses, pharmacists or doctors who are interested in operating a franchise, a lack of startup capital may be a major barrier. For example, for CFWshops, franchisees need to buy into the franchise with an average deposit of US$300 and the start-up costs are approximately US$1,700. For Microclinic International in Ghana, the clinics that they build are 1,100 square feet with small labs and living quarters. These clinics typically cost US$25,000 to build, which is not affordable on a nurse’s or doctor’s salary.
Kiva is looking to partner with organizations that are focused on reaching remote communities to provide high quality, affordable health services and products. In this specific context, Kiva could potentially partner with organizations to provide start-up capital to franchisees to begin their own microclinics and micropharmacies.
If you're interested in partnering with Kiva in this area, please contact our community support team at contactus@kiva.org or check out our Field Partner Application Page.
Rebekah Chang is an intern for Kiva’s Strategic Initiatives team, looking for new partners and loan products to extend opportunities and access to more people around the world. Rebekah has an M.A. in Development Economics and Conflict Management from Johns Hopkins University School of Advanced International Studies. Send her your feedback on this blog series at blog@kiva.org .
This post is part of a larger series on Kiva’s strategic initiatives and innovative loan products, which are designed to expand opportunities for more borrowers across the globe.
Have questions? Send them our way at blog@kiva.org.
Images courtesy of Mercy Corps, SocialEdge and the HealthStore Foundation.
