WiFi Franchise in Sri Lanka

I was introduced to another communication center microfranchise called EasySeva in Sri Lanka similar to the n-Logue or ONE Roof models I have covered previously.  I was informed they have 23 outlets and expect to have 55 outlets by the end of the summer.  It is a private, for-profit Sri Lankan company with a holding company in the U.S. but the seed funding was awarded in a contract with USAID.  The model of EasySeva relies on corporate partnerships to actually provide the services, including Dialog Telekom, Qualcomm, National Development Bank, Lanka Orix, and Microsoft.  They are also working in collaboration with the business school at USC.  After proving the model they will seek private investment. 

That combination of for-profit, government, academic, corporate, and private investment is instructive for those who are considering building a microfranchise operation.  I think it illustrates an effective handoff from public to private support as well as aligning interests with major corporate partners.  The corporate partners are truly that, partners, they are not donors, they have a particular interest in reaching a new market that without EasySeva they would not be able to reach.  

Another element about EasySeva that strikes me is the use of high technology.  Just as cell phones have exploded in the developing world, completely leap-frogging the technology of land lines, WiFi is posed to do the same thing in broadband connectivity.  The broadband wireless technology will allow VoIP connections to allow international phone calls at a cost 40-50% less than their nearest competitor. 

They have ambitious goals to open 400-500 outlets in the next 3-4 years and then expand into the thousands on the subcontinent.  Another one to watch.  

Dave Richards on Microfranchising

A post about Grameen Phone over at Defeating Global Poverty that I think would interest everyone.

Vodacom Phone Kiosks

Vodacom provides phone and fax services to the poor throughout South Africa via phone kiosks set up by Vodacom and operated by a franchisee. In 1993, Vodacom was issued a license to operate in South Africa with specific requirements that involved providing services to the poor who either had limited or absolutely no access to phone lines. Vodacom accepted the challenge and has set up approximately 22,000 phone lines scattered among 5,000 kiosk sites. A kiosk receives a wireless signal which is directed to stationary phones in a renovated shipping container.

Vodacom seeks out entrepreneurs who own and run the kiosks. Vodacom began by tracking cell phones with abnormally high numbers of calls each month. Vodacom perceived that these people were self-motivated entrepreneurs selling air-time. After identifying the natural entrepreneurs, Vodacom trained them how to manage a mobile kiosk. Vodacom no longer has to recruit franchisees; businessmen/women now come to them seeking franchises.

The total cost of setting up a phone kiosk is $7,400; however, Vodacom assumes a greater portion of the costs and leaves the franchisee with a cost of approximately $3,400. Vodacom builds the kiosk and the franchisee is responsible for the equipment and transportation costs. Initially, Vodacom provided loans, but demand for franchises has grown so rapidly that they now have enough franchise applicants that they are able to select people who already have financing.

Total revenue from Vodacom’s 5,000 kiosks was $129.5 million in 2003. Vodacom receives 2/3 of revenues and the franchisee retains the other third, resulting in a gross profit on average of $38,800 a year. This model is a MFO paragon, demonstrating the third MFO hypothesis that a MFO should provide jobs as well as create entrepreneurs. Vodacom kiosks employ an average of 5 people per shop. Currently, the demand for kiosks is greater than Vodacom’s ability to develop them.

Source: BYU Center for Economic Self Reliance
There is also an extensive case study prepared by WRI
These Vodacom shops really show the potential of microfranchises in terms of providing employment, delivering essential services, and being highly profitable for the franchisor. Considering the higher startup costs, the franchisees of Vodacom shops are not the same target market as the Grameen Phone ladies or similar operators, but I actually think employment holds more potential to help poor families than forced self-employment.

Recharging Cell Phones

A very simple microfranchise could be based on an idea I have heard about on a podcast, but was unable to find in a quick search online, which is a cell phone recharging business that using a solar panel to charge car batteries to subsequently charge cell phones. It would be such a simple business with low startup costs. Buy the solar panels in bulk, stick a brand on it, market it to microcredit borrowers, and you have a franchise.

On ChangeMakers there is a wonderful model of renting solar panels spearheaded by Fabio Rosa in Brazil.

Call a Doctor

There are various mobile phone microfranchises such as Grameen Phone. Here is another example of how the mobile phone can be used to deliver services to rural villages, in this case health services. TeleDoc by Jiva won the World Summit Award for eHealth in Dec. 2003. They provide handheld devices to village health workers who then communicate with doctors using a web application to diagnose and give prescriptions. This is a post about Teledoc that was on Little Devices that Could back in January.

MTN Village Phone

MTN Village Phone

MTN Village Phone is an initiative of Grameen Foundation USA in Uganda based on successful Grameen Village Phone company in Bangladesh.

The franchise funcitons with four partners: the telecommunication provider, an MFI, the Village Phone company, and the Village Phone Operator (VPO)
Start-up costs: US$240
Break even: after 26 weeks assuming 17 minutes airtime per day.
Impact: Income to Village Phone Operator, entire community access to information that can enhance income opportunities, improved access to health care/emergencies, connection to be informed of pending natural disasters

Keys to success: the strength of the partnerships, particularly with the MFI to provide start-up capital, did not limit number of sellers per area allowing the market determine demand and not allowing monopolies. No modifications in loan dispersement was required of the MFI. Incentive program for middle men to sell airtime.
Threats: ease of entry for competition, electricity blackouts