A Critical Look at Franchising Healthcare in Kenya

Can franchising solve Kenya's chronic problems of a lack of medical distribution and health care infrastructure?

A PBS NOW expose' on May 25 took a hard look at a for profit-healthcare program that was eager to provide basic care and essential drugs to treat millions of sick people in rural Africa through the same principle used to make fast food franchises a success.  It's plan is to use a business-format franchise system to open healthcare franchises in Kenya that could help diagnosis illnesses and distribute medications for easy-to-treat diseases, services urgently needed to cut down the sky-rocketing death rate among the poorest of people. On the surface it sounds like a noble undertaking, but with their desire to open thousands of these shops under a "Subway-type" model of consistency and growth, some are questioning the dynamics of the program.  While the franchise is being labeled as a humanitarian effort, it is  being set up as a "for-profit" business combined with a "not-for-profit" theme. One critic feels this is not a place for franchising and for-profit business, it's a place for philanthropy.

Click on the image above (Michael Seid, franchise consultant, is photographed) to see the 26 minute PBS Now program.

The NOW program states upfront that the problem with helping the people of Kenya and other areas is not the lack of money. In the last forty years, according to the report, a half trillion dollars has flowed in from charitable donations. Instead, the problem identified is the distribution of the medication and health care. Although the government currently provides these services free of charge, its infrastructure is lacking. 

Scott Hillstrom, an attorney and businessman in Minnesota who founded the program in 2000 in connection with the pharmaceutical CFWshops, agrees that the problem with the government's method is the poor infrastructure, stating the weaknesses in regulation and the use of unreliable supply chains to distribute medications. More than one-half of medications coming into Africa are counterfeit and with limited health inspectors it is difficult to regulate drugs coming in. While Hillstrom has tried growing the CFWshops franchise in Kenya for the past six years, he admits that funding has been a struggle. But when he met Michael Seid, MSA (Michael Seid & Associates), at the International Franchise Association convention two years ago, he felt there was new hope for the program, and after discussions Hillstrom hired Seid's firm to restructure the entire franchise system.

In April, Seid flew to Africa to evaluate Hillstrom's program and to observe the conditions in Kenya. During his trip he was interviewed for the NOW program and he explained that he could see the franchise structure not as a social franchise, but as a commercial business-format applied to human conditions. According to Seid, by replicating shops in a consistent efficient manner and putting into place penalties for violations of the franchise system's rules, franchisees will hopefully adhere to the system rules. He promised a tough critic of the franchise after his return to the U.S. saying he is going to put the fear of God in the franchisees. But he says "We are not on a mission from God, we are on a mission of commerce. God forgives, business people don't. What I need to do is get their minds set on commercial franchising.

Planning Session for New Structure

After his return, Seid was invited to attend a meeting at Hillstrom's office in Minneapolis with other involved executives to discuss the future of the program and Seid was invited to be on CFWshops board of directors.  Three top franchise executives, two past and one upcoming chairmen of the International Franchise Association, were present at the meeting--Jim Amos, Jr., former CEO of Mail Boxes Etc. and Sona MedSpa and current CEO of Tasti D-Lite, Steve Greenbaum, president, CEO and chairman of PostNet International and Sid Feltenstein, present and former executive of companies like Dunkin' Donuts, A&W and Buca, Inc. and Del Taco. Greenbaum has been on CFW's board for several years and Amos was appointed in December of 2006.

But even with the help of top executives, how will a restructuring of the franchise program take on the healthcare crisis in a country with complex problems?  According to the report, that is why the franchisor has to be set up as a not-for-profit entity, relying on charitable donations to fund its budget. Under the new system those donations would go under a separate account which would pay for medical care at the shops. CFWshops would turn itself into a normal American franchisor and pay for itself by selling products to the stores at a profit and charging royalties. So instead of increasing revenue by getting more grants it would get more revenue by helping franchisees deliver more services.

But the report reminds viewers that this is a social enterprise and the bottom line is not profit. The proposed expansion is a way of getting health care to the people of Kenya and one major strength of the franchise will be opening more shops efficiently.

Unanswered Questions

Although observers will be watching this program and wishing for its success, some are asking hard questions. While there is a need for a standardized program of dissemination of medicine and healthcare in Africa, how will the administrators deal with the highly complex issues of the franchise? Among them are the cost of products, storage in safe locations, education, distribution, cost of qualified people and access to such people in remote areas. Africa has no clean water and few, if any, suppliers. Refrigerators are unheard of and coolers are hard to find to store perishable supplies and medications.  With all the cost of infrastructure and the limited funds these people have to purchase food, how will they afford a product that generates the margin a franchisee needs.

Some also question how educated and experienced the CFWshop executives are in the international arena. As they all know, franchising in the U.S. is challenging under the best of conditions. In a third world country it could be a disaster they are not prepared for. Africa has more than its share of corruption and violence.

And how will the CFWshops' program measure its success? By the number of franchisees it signs up or the number of lives it determines it is savings?  Or will it be by those in power proving to the country that by using its international charitable funds for a for-profit franchise business it will somehow revolutionize the country's healthcare system. 

But the real question should probably be, is franchising ready for Africa, or better yet, is Africa ready for franchising?