Internationally the concept of micro franchising has already proved its mettle now its India`s turn. Not only international companies who are setting base in India are using franchising as a business model to operate but many Indian companies who want to
Given the high growth prospects of the urban population in India there is every reason for India to smile. However, there is another part of India which is still not getting the best of facilities which is an equal right of every Indian. Developed India has many services in terms of better financial services, luxury items, access to the world of information through internet, better services in products with the advent of modern retail, leaving aside the rural India where these services are far to be seen.
As per the 2001 census, 73 per cent of Indians live in rural India and India needs to empower these 73 per cent Indians to change the face of new India. Earlier, empowering rural India was considered to be the task of the government, NGOs and self-help groups but now looking at the vast untapped potential of rural India many corporates are eyeing a share of the rural market. Companies are not only keen to serve the rural market but they are also keen to do business out of this untapped huge-opportunity market. Social entrepreneurship is the new rule of the game.
India has now become a key market and sought after destination not only for pan India presence of home-grown companies but also for international companies who are thriving big on the no-urban potential. Companies are fast realizing that India being a key market offers potential not only in urban areas but rural areas as well and most of the companies are using this proposition and positioning them especially for the rural market. Various companies are serving the rural market and in turn help rural masses avail the best services. There are services ranging from medical centers, e-learning kiosks, financial institutions and a range of services specially designed to serve the rural population.
Provision of finance
Microfinance, the provision of small loans (microcredit) to the poor people to help them engage in productive activities or grow very small businesses, is also emerging as another way of reaching out to the rural masses.
Companies like Moksha Yug Access and Intellecash are emerging as those who have derived a model to serve the rural masses. They offer microfinance to the rural community and franchise the centres to reach out to the masses.
Microfinance is a field which is now attracting many biggies like Reliance (ADAG) and Bharti Group who are partnering with microfinance divisions to reach out to the masses. These corporates tie up with Micro Finance Institutions (MFIs) who further serve the poor in getting loans. Microfinance has already proved its potential in various countries in removing poverty and is now being used in India to serve the same. Companies in microfinance swear by franchising as it is the faster mode to reach the farthest corners of any country. The Micro finance institutions provide credit and other financial services to the poor people whose needs are not catered to by the main stream banks.
Intellecap is a consulting company operating exclusively in the multiple bottom-line space. One of the incubation inside Intellecap is IntelleCash. IntelleCash is a microfinance franchise program aiming to help entrepreneurs start micro finance institutions on the franchising format.
MokshaYug Access (MYA) is a rural infrastructure and services company with a primary focus on microfinance. Companies like Moksha Yug Access have even got venture funding as huge potential is being seen in this arena. This funding will be used for MYA`s new ventures like dairy farming and health care centres in the rural areas. Even for these new ventures the MYA would be using the franchising model to reach rural India.
Why target rural India
According to the World Resources Institute, an environmental research organization in Washington, across the developing world, non-profit organizations like Scojo and multinational corporations are revolutionizing poverty alleviation efforts by engaging the poor not just as targets for aid but also as a lucrative global market wielding $5 trillion in actual purchasing power.
Talking about the potential of the rural market, Ujjwal Singh, Head-Sales, Hughes Net, world`s leading provider of broadband satellite services, products, and network solutions informs, “As per McKinsey survey, rural India will provide a market worth $500-600 billion by 2020, which is a huge untapped market. With rising per capita income demand for quality services and products is ever increasing.”
Talking about tapping this huge market he adds, “We expect to effectively cover rural India through franchise and eGovernance kiosks.”
Presently Hughes has over 2,000 rural outlets signed in various states. These satellite connected centers provide services like broadband internet access, education and training which includes courses on skills enhancement, tutorial and vocational programs, value added services like - rail and air tickets, travel related services, mobile pre-paid coupon, e-commerce, cash collection and matrimonial services. Hughes is an active participant in the national eGovernance plan and has established info kiosks across rural India.
The Nokia Siemens Networks Village Connection offers to build rural connectivity based on franchise business model between an operator and the local village entrepreneurs.
Pre-school major Kidzee has Kidzee Gramin its offering of pre-schools, especially designed for the rural areas. Talking about the company`s foray in rural India, Sumeet Mehta, CEO, Zee Interactive Learning Systems, says, “We wanted to offer rural areas the opportunity of quality pre-schooling. Since early childhood interventions play a critical role in human development, we did not want to deny the rural children the right to quality pre-schooling.”
Talking about the emerging potential of rural India Arunesh Singh, India Country Director, Scojo India Foundation, a non-profit social enterprise, says, “Rural areas have, for long, been ignored by large corporations as serious markets due to a variety of reasons. Fragmentation, high delivery cost, low purchasing power being some of them. As a consequence, various goods and services have not found their way into these large populations that are now ready to consume.”
Operating in six countries, the foundation has trained more than 1,000 people to become microfranchise owners, or `vision entrepreneurs`, who conduct basic eye exams, sell affordable prescription glasses and refer those who need advanced eye care to clinics and hospitals. According to Scojo, many of the microfranchise owners have doubled their income, and thousands of farmers, craftspeople and merchants have been able to return to work. Scojo Foundation which serves reading glasses has identified approx. 200 million people in India who require reading glasses (or correction for presbyopia) and of these 70 per cent live in rural India.
Lack of opportunity and low access to eye care services in rural India led Scojo Foundation to initiate their company`s operations in rural areas.
Things are easier said than done. Targeting rural India is not an easy task. Rural market holds numerous challenges not only in terms of educating the rural community about the products and services but also in terms of reaching out to the masses, as rural India is a community which is not ready to accept new reforms easily. Owing to such aspects companies are more interested in appointing a franchisee to take care of this. A franchisee being a known face amongst rural community can break the traditional barriers easily and establish the company`s products and services in a lesser span of time.
The rural area needs to be served with the best services as India`s majority of population lives in the rural areas. But serving the rural area is not easy. You might be offering the right services to help the rural community upgrade but certain obstacles exist in the rural community which make it difficult to take these services to the masses. A rigid mindset, a patriarch society are some of the common features. Owing to such factors different strategies need to be adopted. For example, in rural areas you will find opinion leaders who are close to the rural population and who play a major role in changing the outlook of the rural community. These people hold the power to make it easy or difficult for a company to operate in the rural society. Franchisees remove the obstacles in these areas and make the operations easy.
Reaching out to the rural masses is not an easy task as the rural market is entirely different from urban areas where you can employ various means of promotion and marketing. Franchising, already regarded as the number one marketing tool, helps most of these companies who want to operate in the rural areas.
Talking about the challenges faced in the rural market, Ujjwal Singh informs, “We face challenges like lack of usage, awareness of modern technology and trade practices which we have overcome effectively by evangelizing usage of Hughes services like education, internet access and e -ticketing through free usage, various BTL programs and innovative marketing programs like wall graffiti etc.”
Tackling the challenges in rural areas, Mehta says, “Since income levels on an average are lower in rural India, pricing is one barrier that we face. Hence, we have created a special Kidzee Gramin model for our business partners that require a lower level of investment. The other challenge for rural India is driving compliance due to the distances involved. We have coined the mantra `Get closer to the Customer` by opening regional offices in Tier 2 towns so that coverage of these Gramin centres is not a barrier.”
Highlighting the challenges in the rural areas, Kartikay Rai, Senior Associate, Intellecap, says, “The population density is relatively less in rural areas. The cost of monitoring the day to day operations is high in rural areas as compared to urban areas. The initial effort of building trust with the clients requires more time in rural areas as compared to urban areas.”
Further taking the franchise route to penetrate rural areas Ujjwal Singh says, “We believe rural franchising is the best way to penetrate and operate in rural areas, your franchisee gives access to and information about requirement and challenges in his or her local area.”
Talking about taking the franchise route for expansion in the rural areas Mehta says, “It leverages the entrepreneurial spirit of rural women or youth to expand our centre footprint.”
Being positive about franchising which will help Intellecap reach out to the masses Rai says, “We hope that local entrepreneur brings with him local knowledge and information about different villages, settlements. This will help us in targeting the potential clients.”
Thriving on franchising
Known as a sustainable franchise model, this model has been used world-wide by governments, NGOs, and development institutions in the past few years, few researchers have studied the determinants of success in such a model. Microfranchising, say its advocates, provides men and women in urban slums and isolated villages with the training, products and marketing guidance to get small businesses up and running.
Another NGO, Moksha Yug Access serves the rural masses by bringing computer and internet technology to the rural areas and uses franchising as a biz model to reach the rural community. These franchisees in turn reach the rural community and serve them with various services.
Starting commercial operations in 2006, the company, a 100 per cent subsidiary of the US-based OneRoof Inc, has 10 centres in Tamil Nadu. rural cyber café chain operator OneRoof Service Private Limited, has decided to expand its network in rural areas of south India through the franchisee model.
Scojo India Foundation`s diverse franchise partners include BASIX, Byrraju Foundation, Development Alternatives, Hindustan Lever Limited, and Vedanta Resources. Strategic Eye Care partners include L.V. Prasad Eye Institute and Vision 2020 India, a WHO initiative. Through its innovative, sustainable programs and diverse partnerships, Scojo India Foundation plans to reach ten million customers by 2016.
In Ghana, Fan Milk has sold 8,000 people the bicycles and dairy products to become distributors, and in India, Hindustan Lever has trained nearly 31,000 women in its "Project Shakti" network to sell consumer products like coffee, laundry detergent and toothpaste.
Many companies are using franchising and others are proposing this business model to be adopted to serve the rural market. The idea is to create more rural jobs and more rural opportunities.
With so many challenges involved in operating in rural areas at times companies don`t know how to operate in rural areas. Franchising has been regarded as a solution to all these problems. Microfranchising is a franchise model specially targeted for development.
Many companies regard franchising as a cost effective way through which even corporates can easily penetrate in rural areas. Serving the rural masses with services not only serves the social objective but also gives the entrepreneurs the right channel to utilise their business abilities. Here the franchisee is expected to play a major role not only in promoting the products and services through marketing and various other means but also analyse the rural needs and suggest changes in the products to suit the rural level. The franchise and the enterprise join hands to the betterment of the rural community. Harnessing entrepreneurial energies to serve a cause is a key factor in such a business model.
The entrepreneurs in this model are locally based and are better informed about the rural community and can easily break the barriers which are there for the outsiders. Most of these companies appoint a villager as the franchisee He is provided all the support required in running the centre or service. These services further open a revenue stream for the franchisee. International companies are also setting up subsidiaries in India and there by taking the operations in rural India through franchise route.
Companies are fast realising that franchising is one business model that can break the barrier between service providers and rural masses. They are fast adopting franchising route to serve the rural population. Companies like Moksha Yug Access, Scojo India Foundation, Tarahaat are all leveraging on franchising to bring their services closer to the masses.
Talking about the franchise biz model adopted by Scojo to serve rural masses Arunesh Singh says, “The two most important realities of rural India are the sheer lack of opportunity and low access to various goods and services. The micro franchisee is an ideal answer to address both the above problems. If a business model can be created wherein a local person becomes the service provider selling goods and services (customised to the needs of the rural customer), one would be able to create both opportunity as well as access.”
Utilising rural entrepreneurial skills
Franchising not only helps companies to tap a region which is unknown to an outsider, it also helps in utilising the entrepreneurial talent of the rural India. The franchisee or business partner is continually supported through various means to help him serve the rural masses well.
HughesNet provides its business partners on-going support from a team and initial hands-on training on systems, sales and marketing process and continuous training on different products. Hughes is looking forward to operate over 10,000 centres by December, 2008, with special focus on rural areas across India. In coming times it will also introduce education programmes in vernacular medium and life skill training etc.
The franchisees of Scojo Foundation are called Vision Entrepreneurs (VE`s), who are low income young men and women, they sell reading glasses as a source of livelihood and are able to address the problem of blurry up close vision (Presbyopia) and also facilitate comprehensive eye care. The VEs are trained by Scojo Foundation in a three day training session. On day one, the VEs are trained on the technical aspects of eye care, on day two they are trained on how to run, manage and grow a business. The last day is a practical session, where the VEs go to a village, conduct an eye camp as per the strict protocol set by Scojo Foundation, the trainer assesses them based on their performance at a practical level. If the trainer is satisfied, they become authorised VEs of Scojo Foundation. Scojo Foundation supports the VEs with HR support (each district is manned by a district coordinator who manages 25-30 VEs in his territory), on-going training (both in the field as well as during monthly review meetings), marketing material (brochures, hand outs, banners, T-shirts and wall paintings) and consistent supply of inventory at the district level (both through personal visits as well as monthly meetings). The franchise partners make a small profit on each pair of glasses sold, as do their microfranchise owners.
For Intellecap the entrepreneur has to invest his money in starting the MFI. Intellecash helps them with technical know how, systems, processes and help them in securing grants, loans and equity if desired by them. The franchisee is expected to monitor the operations regularly and follow the systems and processes. The franchisee is supported through in-house training team and field exposure.
Most people relate the word franchising with McDonald`s who pioneered its fast food concept through franchise route and reached endless areas by adopting this business model. But franchising is not restricted to McDonalds only. There are various other things to be learned. Franchising is a route which is now adopted by not only western majors but also by some of the leading Indian companies. Franchising in its essence, talks about entrepreneurship and a model that helps expand your company`s operations in a quick way while banking on the networking and resources of a franchisee. It`s not just fast-food chains like McDonald`s and education institutions like NIIT who have thrived on franchising. Franchising has a much bigger role to play in the society.