Resource Library

Franchising in Frontier Markets: What’s Working, What’s Not, and Why?

This study seeks to address questions about franchising, especially in frontier markets, ranging from whether or not franchising is an under exploited opportunity to accelerate the growth of successful businesses and thereby stimulating economic growth, to what is the potential for franchise business models to effectively – and sustainably – deliver “public” goods and services at scale. Despite the understandable appeal of franchising as a potential business accelerator in frontier markets, there are too many formidable obstacles to successful business format franchising in the frontier markets researched. In particular, most frontier markets lack the purchasing power, access to capital, legal & regulatory framework, and technical advisory services that enable most business format franchises to grow profitably. Researchers did, however, observe promising replicable business models that have flourished in very challenging markets. In particular, the study observed a number of profitable traditional micro-franchises – that is, very smallscale, often single person franchisees profitably distributing standardized branded products or services (think “Avon” rather than “McDonalds”) – in a variety of frontier markets in Africa and South Asia. The simplicity of the business model meeting an underserved market need is the key to their success. The report aims to provide insights for investors and donors, researchers, practitioners, and policy- makers to inform and guide efforts while stimulating additional innovation and research.