The Future of Microfranchising
Youth unemployment around the world is a full-blown crisis. Young adults 18-25 make up some 40% of world’s unemployed, with jobless rates over 50% in countries as diverse as South Africa and Spain. By all accounts, the lack of work is a major driver of gang violence and extremism, and a major cause of migration for young adults in developing nations from Central America to West Africa and the Middle East. Still, our current challenges are nothing like the crisis to come: a virtual tsunami of new job applicants – literally hundreds of millions of new job seekers that will need to find work in the next 15 years – and we are unprepared. We need a new way of looking at employment based not on preparing young adults to join our current way of work – which values experience and age – but a new dynamic structure based on youth that values the capacities and energy they bring, an accessible system that is for the large number of new entrants that are coming soon. That system is Microfranchising.
Why not stick with past approaches to job creation?
We know the next generation of jobs can’t – and shouldn’t – come from government. Large-scale government employment comes in two forms: bullets (the military) or bureaucracy, and both are problematic. Experience shows that a reliance on either can stunt economic growth.
At the same time, while major multinationals and large regional companies are expanding in the global south, their actual employment footprint is (and is likely to remain) limited. Around the world executives get rewarded for cutting – not increasing – headcount, and MNCs are investing massively in technology, from factory automation to drones, to data systems. They are moving away from hiring large numbers of people, especially young, relatively less skilled, workers.
Consider the oil and gas sector, one of the most dominant forces in the world economy for generations today employs by most estimates less than 40 million people. Now compare this to new job seekers in just 3 countries – Nigeria, Ethiopia and the Democratic Republic of the Congo – whose population aged 10-24 is estimated at over 108 million.
If employment through government and large companies isn’t a solution, what about small business? Focusing on entrepreneurship makes sense, after all it fits the culture – some might even say the cult – of entrepreneurship in the global north. It values initiative, and it has a rich panoply of high visibility heroes, from Bill Gates, to Richard Branson, to the founder of Apple, whose name was, well… JOBS.
Still, we’ve seen hundreds of million s spent promoting entrepreneurship from donors and foundations – prizes, contests, grants, training and lots of press… but with limited results. Why? Because the programs simply don’t scale fast enough. Because in most markets, even with training, the obstacles to entrepreneurship are simply too great. And because of one simple fact – though most youth are entrepreneurial, very few are real entrepreneurs.
Why Microfranchising? And why now?
We know that franchises work in nations with high youth unemployment like South Africa, Tunisia and Egypt, and that franchises generally succeed at a much higher rate than other businesses around the world. Franchises don’t rely on age or experience – and are perfect for people with drive and the ability to follow a plan. And they can scale quickly. Franchising works because it is built on a powerful mix, designed to help the franchisee and the whole ecosystem create value and reward effort:
System + Training + Branding + Help with Finance + Teaming and Mentorship
Still most franchises are significantly too expensive for young adults, and in any case, having more KFC outlets will hardly create sustainable growth around the world. In its basic form, a microfranchise is like a franchise, just smaller. And there are a number of small microfranchises out in the marketplace already – selling eyeglasses and medicines in Uganda, beauty products in India. Most have some connection to a charity or NGO, or some sort of donor. Many focus on reaching clients in rural or other underserved areas, but none has reached the kind of scale we need – or know is possible.
We know from the headlines that microfranchising can work. ISIS, Boko Haram, MS-13 and other Central American drug gangs – these are all thriving microfranchises aimed at youth, providing training, tools and branding and help with finance. It is time to compete, building microfranchises that work for the good guys.
Creating a Microfranchise revolution
What would a next generation Microfranchise look like? The goal would be to create a series of microbusiness systems accessible to nearly anyone – based on a powerful partnership with the most interested parties – the young adults themselves. The buy-in for each microfranchise might be as low as $2,000, and come with technology, tools and training to launch and manage the business. Microfranchises could focus on underserved regions, rural areas and slums where larger companies typically don’t and can’t go, using simple technology – especially the cellphone – as the key component for management, service delivery, and data collection.
We could further reduce barriers to entry through cofinancing, by re-targeting CSR, foundation, donor funding to help cover part of start up cost and by encouraging banks to provide special financing windows for microfranchisees – because trained microfranchisees would be legitimately better risks.
Importantly, microfranchising can do more than just provide a better burger. It can solve real societal problems and unlock new markets.
In Agriculture – by providing ag extension services of all sorts, helping test soil, choose crops or improve the use of water or fertilizer
In Education – offering tutoring, test prep, financial advising and tax services
In Healthcare – from eyeglasses to heart monitoring, blood tests – especially with chronic conditions like heart disease and diabetes that are exploding in countries around the developing world
The key lies in capturing money wasted today – days of work missed through poor healthcare, lower crop yields, time, money and danger involved in traveling to wait for often inadequate government services… Bringing service to the underserved can be good business and create the conditions for future employment and growth.
What’s different today?
Five years ago microfranchising was a great idea. Today it can be so much more. Improved technology, connectivity, infrastructure and new sources of finance can help make microfranchises successful and scalable like never before. Marketers and policymakers need the kind of data that microfranchisees could generate about citizen consumers they want to reach at the end of the road. Today we face a global crisis around employment. To solve it we must redefine the model, literally reshaping the way we look at employment. No combination of immigration and simple growth will provide enough places at the economic table for tomorrow’s millions of new job seekers. The choices are stark: will tomorrow’s young adults be future markets or future migrants? In 5 years will they be working in tourism or terrorism? Its time for a microfranchising revolution!