Microfranchising in Base–of–the–Pyramid Markets: Institutional Challenges and Adaptations to the Franchise Model

Abstract

Microfranchising has attracted interest as a potential strategy for rapid scaling within baseof-the-pyramid (BOP) markets. However, our findings suggest that while microfranchising might provide a number of social benefits to microfranchisees and underserved communities, the institutional contexts that characterize BOP markets create a number of significant challenges to the economic sustainability of the microfranchisor and the overall microfranchising model. Simultaneously, our data also suggest several unique adaptations to the microfranchising model that might help mitigate the institutional challenges associated with agency concerns, resource scarcity, and branding/standardization within BOP markets.

Microfranchise emergence and its impact on entrepreneurship

“…Arguably, structuration theory can facilitate a better understanding of social entrepreneurship as it has a capacity to consider how social structures influence action and how action, in turn influences structure. With the assumptions underlying the main theories used in researching franchising -agency theory and institutional theory -proving to be invalid in a BOP context (Kistruck, Webb, Sutter and Ireland 2011), this underscores the inappropriateness of adopting either of the polar opposite positions here. The next section explores the franchising concept, its relationship to entrepreneurship and its role in an emerging market context.…”

“…A review of the extant literature indicates that agency theory and resource scarcity theory are the conceptual frameworks that have been relied upon in theoretically grounded franchising research. Yet, most of this research has been focused on developed economies, with the exception of Kistruck et al (2011) who focused on understanding the economic benefits to the microfranchisor in emerging markets.…”

“…In an emerging market/BOP context the term 'microfranchise' is used to describe "a vetted and replicable turnkey business" that is sold to franchisees in subsistence markets who, in turn, are provided with proven mentoring, marketing and operating procedures (Christensen, Parsons and Fairbourne 2010 p. 595). What differentiates a microfranchise from a traditional franchise is "the intent to alleviate poverty" (Fairbourne 2006 p. 18;Kistruck et al 2011). In an emerging market context, franchisors focus on increased profits with a concomitant focus on the microfranchisee and how he or she benefits.…”

“…While franchising, broadly, is well recognized as a business growth strategy (Kistruck et al 2011;Welsh, Alon and Falbe 2006), it is not always recognized as a form of entrepreneurship . For many scholars, the reduced decision-making autonomy and lower risk are among the reasons franchisees are considered 'managers' rather than 'entrepreneurs' (Seawright, Smith, Mitchell and McClendon (2013).…”

Percepções de valor e elementos estruturantes das microfranquias

“…No estudo de Burand e Koch (2010), tem-se uma discussão superficial, não havendo um aprofundamento teórico de grande robustez. Por seu turno, Kistruck et al (2011) se baseiam em estudos de casos de microfranquias originárias do Quênia, dos Estados Unidos (em atuação em países pobres), da Índia, do Irã e da Guatemala, levando em consideração aspectos institucionais e econômicos destes países e sua influência para o êxito das microfranquias.…”