Enterprising School Leavers

Enterprising School Leavers
Learning Brief


TCB Clothing Redistribution

Micro franchise as a viable solution to unemployment

Category: Enterprising School Leavers | Opportunity mediation services | 6 April, 2014 - 18:00

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PROJECT CONTEXT: THE CHALLENGE THAT OUR PROGRAMME SOUGHT TO ADDRESS

For nearly a decade, the Business Place Philippi and the Clothing Bank have been working with hundreds of self-employed, low-income people in and around Cape Town. Most of these self-employed individuals did not originally set out to be entrepreneurs – they started their small businesses out of necessity because they could not find other employment. They are called “necessity entrepreneurs” who aim to sustainably support their families but who lack entrepreneurial attributes, despite their managerial competencies.

These two successful, Cape Town based organisations – The Clothing Bank and The Business Place Philippi – have joined in partnership to help necessity entrepreneurs access much-needed entrepreneurial skills and successfully manage their businesses, and thus also to tackle the unemployment challenges facing South Africans.

The Clothing Bank (TCB) is a holistic 2-year Enterprise Development training program that empowers unemployed mothers to start a small retail business to help them become financially and socially independent. The Business Place Philippi (TBPP) is a business support centre, based in the Philippi township of Cape Town that assists aspiring or current business owners by providing information, referrals, training, workshops networking opportunities. The core of each Business Place branch is the information centre, where clients are able to receive assistance in working out the next steps to start or expand their businesses.

Together, TCB and TBPP have started the Micro-Franchise Accelerator (MFA), which is discussed in this learning brief.

 

INTRODUCTION TO THE MICRO-FRANCHISE MODEL

The MFA helps necessity entrepreneurs develop entrepreneurial skills and successfully manage their businesses by matching them with business-in-a-box recipes. These so-called “recipes” for successful businesses are micro franchises, which are adapted to each potential franchisee’s skills and aspirations. This strategy is aimed at reducing the new business failure rate, and creating a long-term sustainable solution to unemployment.

The MFA is a centre of excellence that offers a portfolio of proven, commercially viable and replicable-at-scale business models (franchises), as well as a strong support ecosystem to carefully chosen franchisees. This offer dramatically reduces the start-up risk for the non-entrepreneur seeking self-employment. As such, the MFA has a job creation solution that relies on the proven success rate of franchises and on their ability to create rapid employment opportunities. Franchises are much sought after in South Africa because they are easy to adopt and are low-medium risk enterprises. They appeal to low-income populations that seek out small business entrepreneurship ventures in order to survive because they cannot find other employment.

The MFA has started with a few franchise models that will later be replicated and expanded. These come from a pool of potential franchisees available through The Clothing Bank and TBPP. The MFA offers micro franchisees a tailored solution to their employment and income needs, and not a one-style-job that fits all people. As a result, the vision is to have a portfolio of franchise options that could cater to all franchisees various aspirations. In 3 years, the MFA will have 8 different franchise models on offer.

 

OUR PROGRAMME STRATEGY

The MFA is a centre that offers a range of aspirational, proven, commercially viable and replicable solutions for “necessity entrepreneurs”. The franchisees can make a R5,000 monthly income, and are sustainable and independent after 2 years of the program.

We have built a successful methodology that follows 5 key strategic actions:

  1. We have an exhaustive franchise identification process. The MFA selects franchise models that have a proven track record, are commercially viable, replicable at scale, aspirational, and that allow each franchisee to make a monthly profit of at least R5,000. The MFA thoroughly tests and researches each model to ensure that all criteria are respected and practical feasible in the field.
  2. We ensure a rigorous franchisee recruitment process in order to enhance success. Benefiting from the 15 years of accumulated experience between TCB and TBPP, we have built recruitment processes, and developed support materials and manuals that allow us to match the most motivated and skilled franchisees with business opportunities in which they can success. For example, we require all candidates to run market surveys, write small business plans, and prove their interest in the chosen business by demonstrating experience and resourcefulness.
  3. We provide the franchisee candidates with at least 50 hours of training. Training involves induction and orientation, as well as on-going learning. The curriculum covers topics such as business skills, financial skills, life skills, and the franchise processes. Each trainee also works in one of the existing franchises for a month before starting their own business.
  4. We assign business mentors to each franchisee. Once the franchisees start their new business venture, they are assigned a mentor that will help them with their performance management and record keeping on a monthly basis, and who will support them in setting reasonable targets and building action plans to reach the targets.
  5. We provide the franchisees with network and whole ecosystem support through a range of additional services. For at least 2-years into the start of a franchise, the MFA offers the franchisee access to a host of business support services and networking opportunities. We also give them feedback and allow them to share their best practices with each other so that they can gain from peer franchisees’ knowledge and thus constantly improve their own business performance.

 

IMPLEMENTATION TO DATE

The MFA started off by spending a few months on the first step of identifying potential franchise models. We developed a small business model and a database of potential franchisors. We remain on the lookout for new franchise examples and innovative ways to improve our existing options.

To date, the MFA has achieved three main things:

1) Building workable processes and best practice: The MFA has built and consolidated its processes for the 5-step, core methodology (outlined above). Manuals and best practices are in place to document each process.

2) Tracking success: The MFA currently has 4 franchise models in its portfolio and a total of about 25 franchisees running their own business. The four working core models in the MFA portfolio are: sewing franchise, a cobbler franchise, a Nail Salon; and we are testing a micro bakery model. We meticulously document the successes and best practices of these new ventures and keep these in our records.

3) Our selection of franchise models: The MFA wanted franchise models that had a proven track record of success, were commercially viable and replicable, and that met the aspirations of the target audience. Additionally, the MFA founders wanted to use their existing business ventures as starting points. As such, the following franchise options are currently available:

The sewing and the cobbler micro franchises use the lightly damaged garments and shoes from The Clothing Bank that cannot be sold as they are without repairs. This franchise model involves selling these garments and shoes in bargain boxes – for a minimal price – to the franchisees, who then mend the clothes or shoes and sell them for a profit. It provides them with highly attractive brand-named items and then gives them the creative freedom to alter items as desired and to add their own personal touch. Currently there are 14 sewing franchises and 8 cobbler franchises in operation, each making a profit of at least R5,000 per month.

The Nail Salon micro franchise is an attractive beauty venture geared at low-income women who want to run a small nail salon from their home. This franchise model was piloted in October 2013 with 4 women, and their businesses are currently under evaluation and showing early signs of success. Furthermore, we have learnt from these 4 salon case studies and have subsequently improved the model and built additional partnerships. We are ready to launch 50 of these micro franchisees.

The Micro Bakery franchise is a model that we are currently developing with partners specialised in baking bread. The franchise involves running a small bread shop that purchases supplies from a service provider, and focuses on making healthy affordable bread for the community. This franchise is still in pilot phase.

 

IMPLICATIONS FOR OTHER IMPLEMENTERS

The MFA believes skills development is very important for tackling unemployment, but that bridging the link to self-employment is critical. We have learnt that self-employed individuals are not always “entrepreneurs” in the classic definition, but are often “necessity entrepreneurs” or people who go into business out of necessity. They can only really be successful in the long-term if they are provided with the structure and support to get started, and if they have the skills and know-how to maintain their businesses over time.

A few factors underpinning our success:

  • We learnt that it makes sense to partner with complementary service providers who can offer services and support that will benefit the franchisees.
  • We are not franchisors. We provide support to franchisers, and we focus on building on good models and networks for them.
  • We have built up our model from what we already had.
  • We don’t work on assumptions only. We test everything and look for evidence to support or contradict our ideas and assumptions. We use this evidence to then plan strategically.
  • The use of existing resources at TCB and TBPP such as offices, human experiences, access to supply of clothing, the great pool of potential franchisees that have completed a skills development program, an established level of trust amongst the partners.   

In addition, we have the following:

  • Access to the pool of TCB and TBPP potential franchisees to test all assumptions on our target market and make sure the model is aspirational to start with.
  • Strong and experienced partners such as other skills development organizations, and Corporations.
  • Entrepreneurship Experience in low-income communities and familiarity with the target market.
  • A realistic franchise model that relies on rigorous recruitment and training of candidates, and the piloting of each franchise model.

TCB Clothing Redistribution


15 St Michaels Rd, Cape Town  


 0214473334


 www.theclothingbank.org.za

In Short

This Learning Brief provides a summary of how micro-franchises provide small business opportunities for unemployed people. The Micro-Franchise Accelerator gives an introduction to this approach, a programme and implementation strategy, and implication lessons for other interested service providers wanting to know more about how to roll-out similar employment enterprises.


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