The Rise of Microfranchising

Posted by: Steve Hamm on October 21

Over the past 30 years, microfinance has grown to be a powerful global phenomenon. It can be even more powerful when combined with a nascent trend—the rise of microfranchising. The idea is for socially-oriented companies to do the spade work of discovering successful business models for poor people and provisioning them with the equipment they need to do business. I was turned on to this concept by Elnor Rosenrot, venture director at Innosight Ventures, whom I met at the Aspen Network of Development Entrepreneurs conference on Long Island a couple of weeks ago. Innosight Ventures is an offshoot of Clayton Christensen’s Innosight LLC business strategy consulting firm. It focuses on investing in business ideas that can create jobs for poor people.

The microfranchising outfit that Rosenrot told me about is Village Laundry Services, in Bangalore and Mumbai, India, which helps poor people set up street-side laundry services. VLS has developed an all-in-one laundry kiosk complete with washer, dryer, and ironing set up. The kiosks, with the brand name Chamak, are mounted on rollers so they can be moved around fairly easily. They have self-contained water supplies and plug into the grid via extension cords. Customers who drop their clothes off at the kiosks get them back, folded, within 24 hours. That’s a far cry from the normal laundry service in India—where your clothes are washed manually and air dried, and can take days to come back to you. (Too often with missing buttons.)

Rosenrot says VLS has about 15 rigs in service now, hopes to have 110 on the streets by the end of next year and 8500 operating within five years. As of now, VLS owns the rigs, but the plan is to have the entrepreneurs own them—with financing from local microfinance organizations.

In addition to providing ready-made businesses for thousands of poor people, Innosight sees VLS as proving basic business training that will help prepare people to run all sorts of businesses. “We give the local entrepreneurs an opportunity learn from within how a business is run,” Rozenrot told me.

It’s business ownership on training wheels. This is a new form of capacity building that shows tremendous promise for promoting economic development and self-determination in poor countries.

Not-so-poor countries, too. Rozenrot tells me that Innosight Ventures now has an office in Baltimore as has begun setting up ventures here. “There are some strong parallels between Mumbai and inner-city Baltimore,” he says.

Sad, but, I’m sure, true.

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