New Networks Carve Out Their Own Niche

The majority of well-documented social franchises are operated by large coordinating organizations like PSI and MSI that give small, fragmented providers access to great benefits: professional training, branded marketing materials, subsidized equipment, and access to professional advice.

Smaller franchise networks, on the other hand are unable to reap the benefits of these networks to quickly scale up, lower margins, and implement best management practices.

As a result, newer networks must experiment with new business models to carve out their own niche in the marketplace and to overcome challenges inherent to the social franchising model.

Challenges are abundant. First, there is the question faced by many social enterprises of how to effectively market high-quality curative and preventative health services to lower income consumers, a problem Michael Seid of CFW Shops chalks up in part to the presence of competitor services on the market that are often free, such as those provided by charities and government clinics; in addition, people are clearly less willing to pay for preventative than curative services, when apportioning out their own limited funds.

Another challenge is that these smaller networks often have fewer resources from franchisee fees that can be put toward training and protocols, which could result in difficulties in maintaining standards across their network. The lack of resources also makes it difficult to achieve economies of scale.

How do small, entrepreneurial networks innovate to overcome these challenges? We asked Jonathan O’Connor from LifeNet, a clinical network in Burundi, and Shahida Saleem from Sehat First, a telemedicine-based network in Pakistan, to weigh in.

RR: How do you identify entrepreneurs or clinic managers to grow your franchise network?

Jonathan O’Connor, LifeNet: Since we’re focused on church-based health facilities we begin new relationships via church leaders. Churches often operate networks of 2 – 20 clinics and hospitals, which make rapid expansion possible.

Shahida Saleem, Sehat First: Our entrepreneurs usually find out about us through word of mouth, or a call for interest by a local community leader.

RR: How do you start working with new franchisees?

JO: We conduct a baseline assessment across core areas of clinical functions: quality of care, pharmacy, and management (including data and financial reporting). Then we deliver tools as needed.

For example, we’d give financial management training sessions to a clinic with poor financial management; we then teach them how to roll financial data collection forms into an income statement. At the end of the quarter we’d measure progress and continue training if necessary.

SS: We have a one and a half-year minimum training process. Our franchise kit includes SOPS [standards of practice] for all areas, including accounts, health, operations, branding, marketing, reporting mechanisms, forms, and training materials.

RR: Do you tinker with your model to sustain operations through ebbs and flows in health service demand, and spur further growth?

JO: Due to regulatory constraints in Burundi, LN broke apart our model into for-profit and non-profit initiatives. Our Conversion Franchise initiative will be non-profit and training-based, while our Growth Financing loan fund and wholesale pharmaceuticals will be for-profit.

SS: Yes, pretty much every year. With experience we can strengthen our systems to control areas such as pilferage, a common and problematic issue.

We are planning to start selling clean water (Ed note – similar to E Health Point, this will generate foot traffic for Sehat First’s telemedicine services). The root of many illnesses is a lack of clean drinking water.

RR: Jonathan, how do generate sufficient revenue from church-owned clinics in low income Burundi for growth?

JO: Many church clinics use a high volume business model that keeps care affordable for the poor yet is operationally self-sustainable. We aim to service these operating clinics’ needs through LN’s for-profit ventures. Profits generated from loans and pharmacy sales then go to fund the non-profit training.

Our Growth Financing loan fund provides mid-range loans from $5,000 – $50,000 USD to fund expansion, renovation, or working capital to profitable health centers. We’ve found that church facilities often lack adequate access to debt markets and must rely on slow coming donations from the west.

In the fourth quarter of 2012 we’ll launch our for-profit wholesale pharmacy initiative. Private sector health facilities in Burundi have limited access to quality verified medicines, in part due to anemic regulatory capacity. LN aims to import quality-verified essential medicines and profitably service our partners at the same time.

RR: Shahida, during CHMI’s online discussion on telemedicine earlier this year, you mentioned that you’re breaking even at your clinics. What is your approach to ensuring your franchisees attain adequate revenue for future network expansion?

SS: The most important revenue source is the general store, not the health services, for which patients pay just 10 rupees (about 10 US cents). A partnership with Unilever Pakistan provides high-demand items like soap and rice, guaranteeing foot traffic and revenue—centers get between 300-500 patients per month.

We also provide data to pharmaceutical companies. A colleague in Brazil told me in CHMI’s online chat that he’d also built a successful model based on a data sharing relationship.

Our entrepreneurs also innovate to generate revenue. In coastal areas of Karachi, one entrepreneur allows fishermen to take goods to sea for a month and pay shops back when they come back with their catches. Our flexible model allows for this setup here, whereas entrepreneurs would design a very different revenue scheme in the Punjabi farmland.

RR: What kind of scale do you aspire to reach?

JO: In 5 years we plan to have a million person impact, annually, in East Africa. Church-based healthcare plays a huge role in East African health. By working within this sub-sector we believe this level of impact is achievable through our conversion franchise partnerships and wholesale pharmacy clients.

SS: We were hoping to see 500 outlets; however the current political turmoil and violence may prevent this. With a good model, the thing that prevents scaling is instability. But I am determined to find ways to work in those areas.

This post is part of a series on social franchises for health leading up to the First Global Conference on Social Franchising (taking place Nov. 9-11 in Kenya). Find this post, and others in the series, here.